The Russia-Ukraine conflict continued to dominate headlines in March, as both parties entered into peace negotiations. In the US, the first rate hike by the Federal Reserve brought additional volatility into markets. Despite a relatively negative sentiment, equities remained strong as most major indices ended the month in the green.  Equities in China did not fare as well; sentiment was dampened by lockdowns in Tier-1 cities and delisting fears of ADRs. Local stocks also ended in the red despite the reopening of international borders, while the REITs benefitted from the global transition into an endemic. In commodities, crude oil continued to top the charts, but performance of gold was dampened by the interest rate hike.

In the News

  • Global markets continued to grapple with the war in Ukraine, as talks ensued between the two rivalling countries for an agreement to end the deadly war.
  • The US Federal Reserve performed its first rate hike of 25 bps in efforts to curb inflation pressures, while signalling intentions for 6 more hikes within the year.
  • While uncertainties brought on by the conflict brought heightened volatility to the market, major indices in the US managed to end the month on a positive note.
  • The broader S&P 500 Index outperformed the tech centric Nasdaq Composite Index with 4.05% and 3.88% of gains respectively in MYR terms.
  • However, the FANG+ Index, which is a highly concentrated tech index of 10 names outperformed the broader market to gain 4.79% in MYR terms last month, while the 0830EA upped 6.32% due to the volatility of the tech sector.
  • Market sentiment was the opposite in China last month, as its zero-COVID policy brought multiple Tier 1 cities into lockdown, halting economic activities in those cities. Market sentiment dampened further with the news of Shanghai, a city with population of 26 million, being put in lockdown. In totality, 23 cities have been put under lockdown, affecting more than 190 million in areas accounting for more than 13% of the country’s GDP.
  • Equities, especially in the tech sector were also impacted by the delisting fears of US listed Chinese companies due to its non-compliance with audit requirements.
  • While signs of support from the central government saw stocks rebounding towards the end of the month, all major indices in the region saw monthly negative returns.
  • The S&P New China Sectors ex A Share Index’ slid by 7.25% over the month. The NAV of the 0829EA also dipped to a historical low of RM3.9244 on 15th of March, before bouncing back to end the month at RM5.0667.
  • In broader markets, the CSI300 fared the worst in the region with 7.87% losses over the month while the Shanghai Composite Index slid by 6.10% in MYR terms.
  • Local equities ended on a negative note in March, impacted by ongoing uncertainties globally.
  • Despite positive news of the reopening of international borders, the broader KLCI index dipped 1.30% over the month, while the Dorsey Wright Technical Leaders Index slid by 1.84%, bringing the 0836EA down by 1.60%.
  • REITs fared well in March, as talks of borders reopening and the pandemic’s transition into an endemic saw rotation into recovery play, including REITs. As a result, the 0837EA upped by 3.46%.
  • In commodities, crude oil prices continued to take the lead, briefly passing the USD 130 per barrel mark early in the month.
  • However, gold did not fare as well, as the hike in interest rates saw investors flocking back into higher yielding assets.
  • In March, the LBMA Gold Price Index gained 1.55% in MYR terms, while the 0828EA, which tracks the index upped 1.16%, bringing its YTD gains to 7.67%.

On the Economic Data Front

  • Inflationary pressures continue to dominate economic policy
    • The country added 431,000 jobs in March, marking its 11th consecutive month of gains above the 400,000 mark.
    • The personal consumption expenditures price index, used by the Feds to gauge inflation increased 6.4% y-o-y in February, the highest since 1982.
    • Purchases of goods and services fell 0.4% in February as inflation remains persistently high.
  • China economic activity halts as Omicron wave hits major cities
    • Official manufacturing PMI contracted to 49.5 in March, its fastest pace in 2 years.
    • Official non-manufacturing PMI dropped into contraction territory at 48.4 from 51.6 last month.

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