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What’s Trending (5 July 2021)

In other parts of the Asia region, markets continued to show underperformance to its western counterparts as most parts of the region continue to battle the highly contagious Delta variant of the COVID-19 virus.

Investors turned more optimistic in the 2nd quarter of the year as reopening of economies boosted job creations, and nudged inflation higher. It also provided a thrust for the REITs sector, which enjoyed a strong recovery. The US market was a clear winner over the month, with tech stocks stealing the limelight. Asian equities were mixed over the period, with the FBM KLCI ending June as the worst performing market of the bloc. The inability to control the rapid spread of the virus has continued to drag down sentiment for domestic equities as the country shifts into another movement control order.

In the News

  • Markets in the US extended its bull run throughout the month of June as economic recovery continues in the western region of the world.
  • US Fed Chairman Jerome Powell has noted that inflation hikes can be attributed to economic reopening factors, but reassures that the hikes would resolve themselves. Powell reiterated that the Fed has no plans to hike interest rates in the near term.
  • Throughout the month of June, growth stocks outperformed cyclical names, as the Nasdaq Composite Index outperformed the broader S&P500 index by more than 100%, with the former gaining 5.94% while the latter gained 2.65% in MYR terms. 
  • The FANG+ Index, which is concentrated into 10 of the largest tech innovators listed in the US outperformed the broader Nasdaq Composite Index to gain 10.20% in MYR terms. The 0830EA, which aim to provides 200% daily exposure into the index, jumped 19.51% throughout the month,  bringing its YTD gains to 35.68%.
  • In China, the broader market recorded weekly losses throughout most of June, as the resurgence COVID-19 cases in the country saw a correction in old economic sectors. Throughout the month, the CSI300 Index dipped 2.74% while the Shanghai Composite Index fell by 1.40% in MYR terms.
  • On the other hand, the S&P New China Sectors ex-A index managed to outperform the broader market, boosted by JD.com’s sales growth in its annual “618” shopping event, the equivalent to Alibaba’s Singles Day sale.
  • Throughout June, the index saw 1.69% gains in MYR terms, while the 0829EA, which tracks the index saw returns of 1.68% throughout the month.
  • In other parts of the Asia region, markets continued to show underperformance to its western counterparts as most parts of the region continue to battle the highly contagious Delta variant of the COVID-19 virus.
  • In Malaysia, the Full Movement Control Order (FMCO) was extended beyond the intended 14 day period, while the Enhanced Movement Control Order (EMCO) was introduced state-wide in Selangor and Kuala Lumpur, among other areas as case numbers remains stubbornly high in the country.
  • The extension of the FMCO and concerns of persistently high case numbers caused the FBM KLCI index to slide by 3.22%. The Dorsey Wright Malaysia Technical Leaders Index fared slightly better than the broader market, dipping 2.98% in June, while the 0836EA slid 2.56% lower over the month. 
  • The effects of economic reopening were prevalent in the REITs sector, as the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index saw 1.52% gains in June, while the 0837EA, which tracks the index upped 1.60% in the same period, bringing its YTD gains to 6.26%. 
  • Gold prices erased its previous gains in June, as the US Fed signalled an earlier than expected interest rate hike, which cause a strengthening in US Dollar, putting downward pressures in gold prices.
  • As a result, the LBMA Gold Price Index underperformed regional peers by 6.72% in MYR terms in June, while the 0828EA, which tracks the index dipped 6.58% in MYR terms, erasing its YTD gains.

On the Economic Data Front

  • US reports encouraging economic data 
    • Job additions surprised on the upside in June, as 850,000 jobs were added, far exceeding expectations of 700,000 to its highest level since August 2020. 
    • Weekly jobless claims also fell to the lowest since the pandemic started at 350,000.
    • Manufacturing PMI recorded at 60.6%, to its 13th straight month of growth.
  • China’s macro data indicates stall in recovery
    • Official PMI figures recorded at 52.9 in June, to the lowest levels in 14 months.
    • Services PMI recorded at 52.3 in June, despite facing a resurgence in COVID-19 cases.
    • Manufacturing PMI recorded at 50.9, to its lowest level since April

ETF strategies at TradePlus

A look at the performance of TradePlus ETFs

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Jaks Resources Bhd – 29Jul21

While there will be no financial impact on JAKS, we view the matter to be favorable to restore JAKS reputation amongst investors after being clouded by uncertainties over the past 2 years amid concern over potential impairments from the aforementioned matter. Moving forward, JAKS will continue to focus on current operations as well as business expansion plans, particularly in the power and renewable energy business segment.

market pulse

Still in consolidation

The FBM KLCI closed mildly positive following the late bargain hunting activities,
but gains were capped amid unrelenting Covid-19 cases as well as the recent
political developments. Despite daily Covid-19 infection continue to be on the rise
amid ramped up testing in Klang Valley, we expect the vaccination rate should
brush off negative sentiment and traders may look for recovery opportunities. Also,
both the Hang Seng Futures and overnight Wall Street could be due for a technical
rebound and may spillover towards stocks on the local front, especially on the tech
sector. Commodities wise, CPO price was down as demand were seen slowing
down from India and China, while the crude oil extended its gains.

technical focus

Technical Focus – MSM

Leading local sugar producer, commanding approximately 60.0% market share in the local sugar market after having produced 1.0m MT in 2020 that operates 2 sugar refineries with products consumed locally and shipped mainly to Asia countries.
Aims to increase utilisation factor in MSM Johor which is only hovering around 30.0% in 2020, while evaluating for potential disposal to streamline operations. Dry weather in Thailand is expected to prolong to 2022 and the drought that dimmed Brazil productions may support the elevated sugar prices. Technically, traders may anticipate for a potential flag-formation breakout above RM1.32 to target the next resistance of RM1.41-1.52, with long term target at RM1.72.

market pulse

Tepid recovery

Bucking the regional downtrend move, the FBM KLCI rebounded and posted
modest gains on the back of bargain hunting activities as well as expectation on
the economy reopening by October. Although investors will be shifting their focus
from daily Covid-19 infections to the positive vaccination rate locally, the local
sentiment may still remain cautious following the negative performances in China
and Hong Kong after Beijing announced additional measures for the technology,
education and real estate’s sectors. On a side note, foreign investors are net seller
for the third session.

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