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What’s Trending? (23rd Nov 2020)

The light at the end of the tunnel – at least on the pandemic front – appears more evident amid the release of more positive vaccine news; with both Pfizer and Moderna announcing that their respective vaccine candidates have an efficacy rate of above 90%. However, investors were still wary of the rising case numbers around the globe, signalling that things could get worse before it can get better. As a result, markets saw volatility throughout the week. Little change was seen week-on-week as investors weighed the good and the bad, while Chinese markets performed better than its western counterparts. Gold prices continued to slip albeit a falling dollar, as demand the precious metal weakened due to positive vaccine developments.

In The News

  • The world heard more positive vaccine news last week, as Moderna announced an efficacy rate of 94.5%, with Pfizer also revising its efficacy rate to 95%. Pfizer has filed for emergency use of authorisation for its vaccine with the U.S Food and Drug Administration, in hopes to start distribution next month.
  • However, the spike in cases worldwide is not showing any signs of slowing down, with the total number of infections worldwide approaching the 59 million mark with the US crossing the 250,000 mark of coronavirus related deaths.
  • Conflict sparked between the US Treasury and the US Federal Reserve with the former making a surprise request for the latter to return USD 455 billion of unused funds set aside for emergency lending programs, and the Fed expressing its disagreement on the request while reiterating the need for extended lending aid. 
  • US markets saw high volatility and choppiness as markets balanced the good and the bad. The S&P500 index ended the week in the red, dipping 1.49% in MYR terms while tech-heavy Nasdaq rebounded from its dip last week, outpacing the broader market to gain 0.11% in USD terms. However, the index saw -0.51% returns in MYR terms throughout the week due to the weaker dollar. 
  • The highly concentrated NYSE FANG+ Index outperformed the market to gain 0.11% in MYR terms over the week, with the 2x Leveraged 0830EA gaining 1.54% over the week, largely attributed to Tesla’s long awaited inclusion into the S&P500 index, bringing its stock price to fresh highs. The S&P Dow Jones Indices announced that Tesla Inc is set to be included into the S&P500 index in December, after being passed over it its last quarterly rebalancing in September. 
  • China has signed the Regional Comprehensive Economic Partnership (RCEP) with 14 other Asian countries, including Japan and South Korea to form a free trade area that will cover over 30% of the current global GDP, with expectations to reach 50% by the year 2030.
  • It is expected that the free trade agreement will see the elimination of approximately 65% of tariffs and quotas for regional trade in goods; with a targeted 90% removal in 20 years.
  • The Chinese market performed better than its US counterparts with the Shanghai Composite gaining 1.97% while the CSI 300 Index upped 1.71% in the week as investors’ risk appetite improved. The S&P New China Sectors Ex A Share Index ended the week with marginal gains of 0.14%, with the 0829EA gaining 0.04% in MYR terms.
  • On the local front, markets traded cautiously as investors reacted to the ongoing surge in pandemic cases and positive vaccine news, while trailing the market sentiment in the US. Throughout the week, the broader KLCI index ended the week mixed, inching 0.26% higher. 
  • The DWA Malaysia Momentum Index outperformed the broader market last week, with the index gaining 0.47% as glove heavyweights saw some buying momentum with the rising number of cases locally and worldwide, with the 0836EA also gaining 0.44%.  
  • The MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index , gained 0.14% last week, continuing its positive momentum as more positive vaccine news saw investors gaining confidence in long term market recovery with the 0837EA ending 0.06% in the green. 
  • Gold prices slid 1.32% lower against the falling US dollar last week as the inflow of positive vaccine news hampered the demand for the safe haven asset. The 0828EA trailed the downwards trend, sliding another 1.36% last week in MYR terms, with YTD returns of 21.26%. 

On the Economic Data Front

  • US economic data shows need for additional support
    • Weekly jobless claims rose for the first time in over a month, recording at 742,000
    • Retail sales missed analyst’s expectations, recording its slowest growth pace since April at 0.2%
    • Housing data continues to provide good news, with sales and construction indicators hitting its highest levels in over a decade
  • China signals further stabilisation in its economy
    • China’s industrial output surpassed analyst expectations in October, growing by 6.9%
    • Retail sales also saw growth of 4.3%, albeit at a lower than expected pace
  • Japan shows strong economic rebound from the pandemic
    • 3rd quarter GDP surpassed expectations of 18.9%, recording at an annualised rate of 21.4%
    • Coronavirus stimulus proved effective as private consumption contributed largely in boosting domestic demand 

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A look at the performance of TradePlus ETFs, and major global indices

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Mah Sing and AirAsia warrants joined the bandwagon

macquarie structured warrants 20200914

The Malaysia warrants market recorded a RM809.8mil turnover last week, which is 1.7% higher than the prior week due to renewed interest in stocks which were badly beaten down due to the Covid-19 pandemic. Nonetheless, warrants over rubber glove stocks continued to dominate the warrants space with RM455.4mil traded, which made up more than 56.2% of the total warrants market. 

Supermax, Mah Sing and Top Glove were among the most popular rubber glove underlyings last week. The shares of rubber glove players experienced heavy selling pressure throughout last week before staging small rebounds on Friday following RHB Investment Bank’s statement that the Covid-19 vaccine deployment could be a new demand source for rubber gloves at up to 18bil pieces a year assuming that 60% of the world’s population of 7.5bil will get the vaccine in two doses annually (The Edge Markets, 19 Nov).

Call warrant SUPERMX-C1I was crowned the top traded warrant last week with 220.1mil units traded, followed by MAHSING-C30 and TOPGLOV-C84 which ranked third and fifth on the list with 91.8mil and 63.9mil units traded, respectively. Last week, investors took home a total of 11.5mil units of MAHSING-C30 which resulted in this call warrant being close to sold out. Investors should practise caution when trading sold out warrants as the warrant’s market bid price may be inflated by other investors queuing in the market.

Following the positive vaccine developments by Pfizer and BioNTech on 9 November, another American biotech company Moderna Inc said on Monday that its experimental Covid-19 vaccine was 94.5% effective in preventing the disease. Budget airline operator AirAsia Group finished in the green for the second consecutive week as its share price recorded an 8.3% week-on-week (w-o-w) gain on hopes of the upliftment of travel bans. Call warrant AIRASIA-C1J secured the fourth spot on the top traded warrant list with 80.4mil units traded as the warrant price jumped 25.0% w-o-w.

Meanwhile, put warrant HSI-HDI came in second on the top traded list. Out of the total 120.7mil units traded, bearish investors accumulated more than 5.0mil units as the warrant’s bid price fell 35.0% w-o-w, moving in an opposite direction to the 1.1% weekly gains in the Hang Seng Index futures. 

Top warrants by volume traded:

Warrant nameVolume
IssuerExercise level/priceExpiry date
SUPERMX-C1I220.1Kenanga14.0026 Jul 2021
HSI-HDI120.7Macquarie23,40030 Dec 2020
MAHSING-C3091.8Macquarie1.5821 May 2021
AIRASIA-C1J80.4Kenanga0.8026 Apr 2021
TOPGLOV-C8463.9CIMB6.0026 Jan 2021

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Provided for Malaysian residents information only. This commentary has not been reviewed by the Securities Commission Malaysia. It is not an offer or recommendation to trade and is not research material. Past performance is not indicative of future performance. You should make your own assessment and seek professional advice.