Effects of the Omicron variant’s heightened transmissibility was felt in January, as multiple nations around the globe saw record high daily cases numbers. While US market saw losses due to rising case numbers, rising inflation and rate hikes, economic data showed that it was still on track to economic recovery. In China, sentiment was dampened by continuous troubles in the property sector, despite seeing an interest rate cut. Locally, markets trailed the global negative sentiment to end in the red, mainly weighed down by industrials and the information technology sector. Gold price also did not fare well as news of higher-than-expected rate hikes dampened its performance.

In the News

  • The aggressive spread of the Omicron variant saw global case numbers rising exponentially in January, with multiple countries recording record high daily infections over the month.
  • Sentiment was further dampened by news that the US Federal Reserve is looking to raise interest rates as soon as March, while continuing its plan to taper bond purchases despite rising pandemic numbers.
  • As a result of the jittery sentiment, equities in the US took a nosedive, with the technology sector taking the hardest hit.
  • Throughout January, the Nasdaq Composite Index underperformed the broader market, dipping 8.47% in MYR terms while the FANG+ Index slid 7.25%. As a result, the 0831EA, which provides -100% exposure into the index managed to gain 6.45%.
  • The broader S&P 500 index dipped 4.72% in January, lifted by the energy sector which saw the biggest gains over the month as political tensions intensified at Ukraine.
  • The monetary stance was the opposite in China, as the PBOC announced a cut in interest rates as opposed to the US Fed’s hawkish stance. However, the rate cut was insufficient in lifting market sentiment.
  • Combined with rising COVID-19 cases in the “zero-COVID policy” nation, the ongoing uncertainties on the property sector also contributed to last month’s negative performance ahead of the Lunar New Year.
  • The S&P New China Sectors ex A Share Index managed to outperform the broader index, only dipping 3.27% while the Shanghai Composite Index and the CSI300 Index tumbled 7.00% and 6.97% respectively in MYR terms.
  • Hong Kong markets ended the month in the green in January, with the HSCEI Index upping 1.96% in MYR terms over the month. The 0832EA also recorded gains of 1.43% over the month.
  • In local markets, stocks echoed the negative sentiment across the globe, as the broader KLCI Index dipped 3.53% over the month. 
  • The DWA Technical Leaders Malaysia Index underperformed the broader market, dipping 7.78%, as stocks in the industrials and information technology sector saw the biggest losses over the month. Consequently, the 0836EA, which tracks the index also dipped by 7.81% over the month.
  • Crude oil prices surged over January amid heightened demand and expected supply constraints arising from the Russia-Ukraine tensions.
  • Gold prices however did not fare as well, as talk of the expected hefty interest rate hike in March brought the performance of the precious yellow medal into negative territory.
  • In January, the LBMA Gold Price Index ended 1.06% in the red, while the 0828EA which tracks the index dipped by 0.09%.

On the Economic Data Front

  • Resilient economic recovery justifies US Fed’s hawkish stance
    • GPI growth recorded at 1.7% last quarter, bringing 2021 growth to 5.7%, its largest annual growth in nearly 3 decades.
    • Consumer price Index (CPI) rose by 7.5% in 2021, its fastest pace in almost 4 decades.
    • Jobs report showed addition of 467,000 jobs despite Omicron fears, beating expectations by almost three-fold.
  • Economic recovery in China less optimistic than western counterparts
    • GDP growth in 4Q2021 recorded at 4.0% YoY against 4.9% YoY in Q3 but beat market expectations.
    • Manufacturing PMI fell into contraction territory at 49.1, the lowest level since February 2020.
    • Services PMI continued to expand but fell from December’s 53.1 to 51.4. 

 

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