Global markets bounced back into the green last month thanks to strong earnings reported across the board, accompanied by dovish comments by the Fed despite another 75 b.p. rate hike in July, along with news that the economy contracted for the second consecutive quarter. However, in China, markets moved in the opposite direction, as sentiment was dragged down by ongoing troubles in the property sector, accompanied by a less aggressive stance from the PBOC to meet its initial economic growth target. Locally, equities ended with gains, trailing positive global sentiment accompanied by strong foreign inflows, while the REIT sector also recovered, benefitting the 0837EA over the month. Commodities lagged amid rate hikes and improved risk appetites.

In the News

  • Global markets saw a rebound in performance towards the end of the month as the US Fed’s dovish sentiment, accompanied by stellar earnings report by US corporates.
  • While the US Federal Reserve’s maintained its hawkish stance with another 75 b.p rate hike in Aug, Fed chief Jerome Powell signalled that the pace of rate increases may slow down as the stance on monetary policy remains flexible.
  • The US economy saw an annual contraction rate of 0.9% in 2Q2022, following a 1.6% contraction in the first quarter.
  • The Feds’ dovish comments and strong earnings report across the board triumphed slowing macro data and rate hikes, as the tech-focused Nasdaq Composite Index rose 13.51% in MYR terms last month, while the S&P 500 index upped 10.24%.
  • The FANG+ Index also gained 11.92% over the month, bringing the daily 2X leveraged 0830EA up by 21.24%.
  • Market sentiment in China continued to move inversely to its western counterparts last month, impacted by mortgage boycotts by homebuyers, along with the government’s firm stance on its policies which brought markets into the negative.
  • The latest politburo meeting in China signalled flexibility in achieving its economic growth target this year, and its intention to slow down stimulus measures, while also reiterating its zero-COVID policy.
  • All major Chinese indices saw losses last month, with the Shanghai Composite index and the CSI300 index dipping 3.94% and 8.47% respectively in MYR terms.
  • The S&P New China Sectors Ex A Share index trailed the broader market sentiment to end in the red, dipping 8.71% in MYR terms last month.
  • Outside of China, Asian bourses recorded a relatively positive month in July, in tandem with global market sentiment with expectations that the Fed’s tightening cycle is approaching its peak.
  • The local FBM KLCI Index saw gains of 3.32% on the back of higher inflows, while the DWA Technical Leaders Malaysia Index gained 2.65%.
  • REITs also saw a rebound in performance, as the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap upped 3.51% in MYR terms last month, bringing the 0837EA up by 3.33%.
  • Commodities did not fare well in July, as the LBMA Gold Price Index slid 2.01% last month on the back of rising rates, alongside an increased risk appetite in markets.


On the Economic Data Front

Despite economic slowdown, US jobs growth remains resilient.

  • June showed strong jobs growth with 372,000 new jobs added, while unemployment rate remained at 3.6.
  • GDP contracted 0.9% in 2Q2022, following a contraction of 1.6% in the first quarter, fuelling recession concerns.

China economic activity shows mixed data despite recovery sentiment

  • Official services PMI remained in expansion territory of 53.8 but moderated from June.
  • Manufacturing PMI came in at 49.0 in July from 50.2, falling into contraction territory despite market recovery.


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