US equities enjoyed a bullish run towards the end of October, as better than expected earnings, coupled with news of Tesla eclipsing USD 1 trillion market cap saw most major indices hit record new highs in the last week, with the 0830EA also reaching record high NAV. Equities in China did not fare as well, as continuous pressure on the property sector hampered investor confidence. However, New China sectors saw gains as constituents recovered from its previous month low. Locally, sentiment was mainly boosted by recovery play, but moderated in anticipation of the Budget 2022 meeting. Gold saw gains with long-term inflation concerns, while REITs benefitted from global economic reopening.

In the News

  • Global sentiment turned positive in October, despite seeing a slowdown in US 3Q GDP growth and expectations of interest rate hikes.
  • With continuous economic recovery in play, US Federal Reserve has indicated its intentions to reduce its bond tapering programs as early as November this year.
  • All eyes were on tech last week as EV maker Tesla struck a deal with rental car company Hertz, with the latter agreeing to purchase 100,000 electric vehicles from the former.
  • The good news brought Tesla’s market capitalisation above USD 1 trillion, joining other mega-tech names such as Apple, Amazon, and Google, while major indices eclipsed record highs following strong 3rd quarter earnings reports.
  • The FANG+ Index, which includes Tesla and the other mentioned tech giants rose by 9.05% in MYR terms over the month, outperforming the regional peers and bringing YTD gains of the 0830EA to 39.93%.
  • In October, the broader S&P 500 index saw gains of 5.71% in MYR terms, whereas the tech focused Nasdaq Composite Index upped 6.06% in MYR terms.
  • In China, equities saw slight recovery despite continuous negative news from the property sector, partly supported by the central government’s reassurance on the property market.
  • Over the month of October, the Shanghai Composite Index fared the worst, dipping 1.10% in MYR terms while the CSI 300 saw marginal gains of 0.35%.
  • The S&P New China Sectors ex-A Shares Index, which does not have exposure into the property sector outperformed the broader market as companies in the New China sector rebounded from previous month’s low, gaining 2.85% in MYR terms. The 0829EA, which tracks the index, saw NAV gains of 2.72%.
  • On the local front, market sentiment was mostly positive due to continuous economic recovery, which saw all state moving onto Phase 3 and 4 of the NRP. However, markets remained cautious ahead of the Budget 2022 meeting, which was held on the 29th of October.
  • In October, the broader FBM KLCI Index gained 1.59%, while the Dorsey Wright Technical Leaders Index outperformed the broader market with 3.59% gains, bringing the 0836EA up by 2.85%.
  • For gold, long-term inflation worries outweighed the Fed’s hawkish stance on monetary policy as the LBMA Gold Price (AM) rose by 2.61% in MYR terms in October, while the physical gold backed 0828EA upped 2.02%.
  • The REITs sector was impacted by the US Fed’s indication to taper bond purchase programs, but managed to eek out marginal gains following global economic recovery that instilled hopes on higher income outlook for REITs.
  • Over the month, the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index saw marginal gains of 0.26%, while the 0837EA which tracks the index gained 0.5%.

On the Economic Data Front

  • US show signs of slowing economy
    • The economy saw an annualised growth of 2% in 3Q, a sharp slowdown from the previous quarter of 6.7%
    • Inflation pressures have appeared to ease as the Fed’s gauge for inflation rose 3.6% over the annual period, below expectations.
    • Weekly jobless claims fell to the lowest since the pandemic to 281,000.
  • Eurozone shows better than expected economic recovery
    • GDP figures for the regions recorded at 2.2% for 3Q, above consensus estimates of 2.0%.
    • However, inflation rate came in at a 13 year high of 4.1% in October, above expectations.

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