The saying “Sell in May and Go Away” seemed to have held true last month, before global markets rallied sharply over the last two days of the month before ending flat M-o-M. Heightened volatility was experienced last month as investors digested more rate hikes and the possibility of a recession. In China, markets also rallied towards the end as 2-month long lockdowns were lifted in major cities, coupled with supportive policies to bolster the effects of its zero-COVID policy. Locally, market sentiment was the opposite as equities moved into the red. Commodity wise, crude oil prices jumped to see double digit gains, while gold slid into the red amid a shift into risk assets.


In the News

  • Global markets in May were in the red during most of the month, before rallying sharply towards the end to cover its month-to-date losses.
  • In Fed news, the US economy saw a further 50 b.p hike in rates, with another expected 50 b.p rate hike expected in June and more to come.
  • The saying “Sell in May and Go Away” held true during most of the month, as markets saw heightened volatility throughout May with major indices hitting 52-week lows before rallying towards the end to close almost unchanged in USD terms.
  • Investors were also continuously spooked by the possibility of an economic recession following the US Fed’s tightening monetary policy, coupled with ongoing geopolitical tensions.
  • In May, the S&P 500 index saw marginal gains of 0.01% in USD terms but was up 1.06% in MYR terms as the local currency weakened past 4.4 against the USD. Tech focused Nasdaq Composite Index and highly concentrated FANG+ Index ended the month in the red, down 1.02% and 0.58% respectively in MYR terms.
  • Volatility throughout the month saw the 0831EA, which aims to provide -100% exposure to the FANG+ Index gaining 0.39% over the month.
  • In China, all major indices rebounded late last month to end in the green, as the country eased lockdown restrictions after 2 months in end-May.
  • Compounded with supportive monetary policies from Beijing to combat the economic impacts of its zero-COVID policy, markets rallied towards the last week of May following losses during most of the month.
  • The Shanghai Composite Index led gains with 4.67% returns in MYR terms, followed by the CSI300 Index with 1.97% and the S&P New China Sectors ex A Share Index, with 1.95% gains respectively in MYR terms. The 0829EA saw gains of 1.62% over the month.
  • Locally, indices underperformed regional peers, as Bank Negara Malaysia (BNM) hiked the overnight policy rate unexpectedly by 25 b.p, in effort to curb rising inflation. Sentiment was also weak, as the MYR weakened past 4.4 against the USD, its lowest level since May 2020.
  • The broader KLCI Index dipped 1.9%, while the Dorsey Wright Technical Leaders Index slid 3.16%.
  • Commodity wise, gold took a backseat as investors flocked into risk on assets, with crude oil prices jumping 10.68% over the month amid supply crunches and inflation worries.
  • The LBMA Gold Price Index slid 2.17% over the month, but is still seeing YTD gains of 7.29% in MYR terms, while the 0828EA has recorded 7.92% gains YTD.


On the Economic Data Front

Inflation in the US may be peaking

  • CPI moderated for the first time in 8 months to an annual pace of 8.3%, but remains at a 40 year high.
  • May saw 390,000 jobs created, while unemployment rate remained steady at 3.6%.

China economy benefit as lockdown eases

  • Manufacturing PMI rose to a stronger than expected reading of 48.1 in May, signalling that the worst might be over.
  • Outbound shipments grew 16.9%, the fastest growth since January beat expectations by more than two-fold.


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