The world put its focus back on the pandemic in November, as the emergence of the highly mutated Omicron variant hampered investor’s confidence on economic recovery. Investors flocked into gold as a result, bringing net inflows into the precious yellow metal for the first time since July. Despite virus fears, the US Feds have announced its intentions to speed up its bond tapering program, citing inflation pressure as signs of an improving economy. In China, virus fears coupled with renewed US-China tensions and the ongoing property default crisis saw new economy sectors underperforming the old. Locally, market sentiment largely trailed global sentiment, ending the month in the red.
In the News
- The COVID-19 pandemic was thrusted into the spotlight once again as the Omicron strain of the virus was flagged by WHO as a strain of concern due to its high transmissibility.
- Concerns on supply chain disruptions and economic recovery brought market sentiment to a low, as investors waited on more concrete data concerning the variant.
- The US Federal Reserve’s intention to taper bond purchases sooner than expected also pushed market sentiment lower as investors braced for the imminent hike in interest rates. The move comes as inflationary pressures continue to rise, signalling a recovering economy.
- In November, the S&P 500 saw marginal losses of 0.83% in USD terms, while recording positive returns of 0.90% in MYR terms as the local currency weakened against the dollar. The marginal dip was largely contributed by a retreat towards the end of the month caused by heightened uncertainties.
- The tech-focused Nasdaq managed to end the month on a positive note with 2.01% gains in MYR terms while the FANG+ Index underperformed with gains of 1.01%, mainly dragged down by Chinese tech giant Alibaba. However, the 0830EA dipped by 1.42% due to the heightened volatility.
- In China, markets were mixed in the month of November as investors digested news of rising COVID cases, renewed tensions between US and China and rising risk of defaults in the property segment.
- Sectors in the New China Economy were badly hit, as Alibaba’s disappointing earnings reports and worsening US-China relations brought tech and consumer names to a low.
- In November, the S&P New China Sectors ex A Share Index ended the month 5.08% in the red in MYR terms as China tech names continued to be dragged down by regulatory tightening pressures. Broader China market indices fared better, with the Shanghai Composite Index and the CSI300 Index gaining 2.88% and 0.81% respectively in MYR terms.
- Locally, equities ended in the red as it trailed the negative global sentiment, coupled with the announcement of prosperity tax and stamp duty changes during Budget 2022.
- In November, the broader FBM KLCI Index dipped 3.09%, while the 0836EA, which tracks the DWA Technical Leaders Malaysia Index was dragged down by 2.99%.
- On the commodities front, investors flocked into lower risk assets following the various uncertainties brought on by virus fears. Last month, global gold-backed exchange-traded products saw net inflows for the first time since July, as US inflation reached its highest level in 31 years.
- Over the month, the LBMA Gold Price Index upped 1.82% in MYR terms, bringing the physically backed 0828EA to gain 1.25%.
On the Economic Data Front
- US economic recovery sees slowdown in job growth
- Nonfarm payrolls came in lower than expected, adding only 210,000 jobs in November.
- Goods exports rose 11.1% while services grew 1.6%, as the pandemic continues to limit the services industry.
- Economic activity in China shows mixed signs
- Official manufacturing PMI for November 2021 rose for the first time in 3 months to 50.1, as pressures from power rationing and rising raw material prices eased.
- Private manufacturing PMI however fell to 49.9 in November, a contrast from the official number.
- PBOC announced its decision to cut its reserve requirement ratio (RRR) by 5bps, amid slowing economic growth.
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