Global equities were dominated by the US Fed’s hawkish stance in August, bringing all major indices into the red as investors expect more rate hikes. News flow in China were a mix of good and bad, which saw equities in China ending on a mixed note. However, the New Economy Sectors fared better than the broader market as encouraging news on the potential delisting of ADRs boosted equities. Local equities also had a good month on the back of further economic reopening, while news of Najib Razak’s conviction in the federal court dominated headlines. In commodities, gold prices continued to slide following hawkish sentiment from the US Feds.

 

In the News

  • Global market sentiment was dominated by the US Federal Reserve’s reiterated stance to curb inflation pressures in the US, even if it means hurting business and consumers in the short run.
  • Despite rising rates, macroeconomic data in the US continues to show signs of growth, further solidifying the Fed’s stance to continue its monetary tightening route.
  • All major US indices slid into the red last month, with the broader S&P 500 Index outperforming the tech-heavy Nasdaq Composite, as the former dipped 3.68% in MYR terms while the latter slid 4.08% in MYR terms.
  • The FANG+ Index fared batter than broader market indices, only dipping 3.27% in MYR terms over the month, bringing the -100% exposed 0831EA up by 3.52%.
  • August was an eventful month for China, as geopolitical tensions, power shortages, the ongoing property woes, and its zero-COVID policies brought on market volatility.
  • More notably, US House Speaker Nancy Pelosi’s controversial visit to Taiwan re-sparked geopolitical tensions between the world’s two largest economies.
  • In New Economy Sectors, things seem to be looking up as Beijing reached an agreement allowing US auditors to inspect China based accounting firms, signalling a positive step to prevent the delisting of ADRs.
  • Over the month, the S&P New China Sectors index fared better than its broader peers, gaining 1.78% in MYR terms, while the 0829EA also saw gains of 1.32%.
  • In the broader market, the Shanghai Composite Index and the CSI 300 Index slid 3.09% and 3.70% respectively.
  • Outside of China, Asian bourses continued to see positive momentum following continuous economic recovery activities. 
  • Local new headlines were dominated last month with the conviction of former prime minister Najib Razak in federal court, becoming the first prime minister in the country’s history to serve jail time.
  • The broader FBM KLCI Index upped 1.33%, while the DWA Technical Leaders Malaysia Index fared better with gains of 3.24%. The 0836EA subsequently upped 3.12% in August.
  • Commodity prices continued to slip, with crude oil prices in the lead with losses of 8.66% in MYR terms last month.
  • Gold prices also maintained its downwards trend on the back of rising rates and the Fed’s hawkish stance, dipping 2.07% over the month. However, the 0828EA is still seeing 3.03% gains YTD.

 

On the Economic Data Front

Growth indicating macro data supports US Fed’s hawkish stance:

  • US CPI for July remained unchanged month-on-month, but eased more than expected on an annual basis.
  • 528,000 jobs were added in July, surpassing estimates of 250,000 and well above June’s reading of 398,000.
  • Unemployment rate slid to 3.5%, while wage growth rose by 5.2%.

China macro data shows weakness amid multiple headwinds:

  • Official non-manufacturing PMI contracted to 5.26 in August, amid COVID case spikes.
  • Official Manufacturing PMI rose marginally to 49.4 from 49 in July.
  • Exports grew by 7.1% y-o-y in August, but was far from July’s 18% growth reading; dragging the yuan exchange rate against the USD lower.

 

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