All eyes were on China last month, as markets around the world were spooked by Evergrande’s debt crisis, which has since seen some positive news, curbing the negative sentiment. However, most major indices saw negative returns last month, due to the US Feds raising its short term interest rate views, along with inflation concerns. On the contrary, China’s broader index managed to eek out gains despite its energy crisis, while the new China economy continued its downwards trend with fresh crackdowns on gaming companies. In commodities, crude oil prices soared amid global economic recovery, while gold prices slid due to a stronger US dollar.

In the News

  • Global sentiment was mostly negative over the month, as major markets around the world kept their eyes on the Evergrande saga, which is now the world’s most indebted developer with USD 300 billion of debt.
  • US Fed’s hawkish stance on interest rates also weighed down on market sentiment, as policymakers aim to raise interest rates as soon as next month and cut back on its bond purchase program, in light of steady jobs data.
  • Over the month, US markets snapped its upwards streak to end the month in the red, with the broader S&P 500 dipping 4.02% in MYR terms, while the tech focused Nasdaq Composite Index underperformed the broader market, sliding 4.58% in MYR terms.
  • While the Nasdaq underperformed the broader market, the highly concentrated NYSE FANG+ Index fell lesser than the broader index, ending the month 3.85% lower in MYR terms, bringing the 0831EA to gain 3.89% in September.
  • In China, the Evergrande debt crisis fuelled negative market sentiment, which initially posed a significant default risk on the country’s economy. However, PBOC’s recent reassurance of a healthy property sector development have eased market worries.
  • On the other hand, the country’s energy crisis also halted industrial activity, as factories in 20 of China’s 31 provinces have suffered a loss of power. As a result, the country’s manufacturing PMI slid into contraction territory in September.
  • Despite the trail of negative news, China’s blue-chip index, the CSI 300 managed to eek out gains of 2.3% in MYR terms, supported by consumer staples sector while the Shanghai Composite index upped 1.71% over the month.
  • However, the S&P New China Sectors ex-A Shares Index continued to underperform the broader market, bringing the 0829EA, which tracks the index down by 2.35%, after regulators targeted gaming companies in its latest crackdown.
  • The local market trailed regional sentiment to end the month on a negative note, coupled with investor concerns of the possible establishment of windfall taxes on corporations in the country.
  • Over the month, the broader FBM KLCI Index slid 3.97%, while the Dorsey Wright Technical Leaders Index, which utilises the smart beta strategy to identify momentum fared better than the broader index, recording a marginal dip of 0.13%, while the 0836EA upped 0.57%.
  • Commodity wise, gold prices took a turn into the negative after US Fed’s announced its plans to taper its bond purchase program and raise interest rates, resulting in a stronger US dollar. Over the month of September, the LBMA Gold Price (AM) dipped 3.86% in MYR terms, while the 0828EA dipped 2.30%.
  • However, crude oil price jumped by 10.38% over the month, supported by demand resulting from a continuous economic recovery and a supply side shortage.

On the Economic Data Front

  • US economic data continues mixed growth  
    • A key indicator for inflation indicated an increase of 3.6% in the month of August.
    • Personal spending data showed an increase despite inflation worries, upping 0.8% in August
    • Factory orders rose 1.2% in August, an indicator of sustained recovery in the manufacturing sector.
  • China’s macro data indicates uneven recovery  
    • Manufacturing activity in September dipped to a 19-month low into contraction territory at 49.6, amid the ongoing energy crisis.
    • Non-manufacturing PMI fared better at 53.2, supported by the services sector as lockdown restrictions ease.
    • Economist have revised China’s GDP growth lower to 7.8% from 8.2%, citing the country’s energy supply crunch.

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