Global equity markets as a whole recovered from the previous week, with the MSCI AC World Index recording a 0.31% gain over the week ended 4 August 2017. Amongst the developed market, the European equity market edged out both Japan and the US, notching a 1.15% rise from the previous week. S&P 500 index rose a tepid 0.12%, while Japan’s Nikkei 225 Index incurred losses of 0.08%.
Emerging markets and Asia ex-Japan also kept in step with the Europe and US markets, with the MSCI Emerging Markets Index and the MSCI Asia ex-Japan Index advancing 0.33% and 0.56% respectively. In the emerging market space, Brazil was the star over the week, with the Benchmark Bovespa Index surging 2.86%. Hong Kong came in subsequently, with the Hang Seng Index climbing 1.97% over the week. The Chinese H-share market (represented by the HSML100 Index) rose 1.31%, outmatching its onshore counterparts, while Taiwan’s equity market rose 1.03% over the week. Performance of Southeast Asian markets under our radar like Indonesia, Singapore and Thailand were relatively more muted across the week, while our home country, Malaysia outperformed its peers across ASEAN region, clocking a 0.42% over the week.
This week, investors are on the lookout for the release of the NFIB's Small Business Optimism readings from the US, as well as the JOLTS data for the month of June 2017. The UK's, France's and Germany's June industrial and manufacturing production numbers are also expected to be released, while market participants are also on the lookout for Japan's machine orders data for the month of June. Taiwan July’s exports data grew 12.5% year-on-year which is better than expected than the previous forecast of 9.8%. Meanwhile in Singapore, finalised 2Q 17 GDP numbers as well as June's retail sales data are also scheduled to be released.
[All returns in MYR terms unless otherwise stated]
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Market Valuation As Of 04 August 2017
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US: July's ISM Non-Manufacturing Weaker Than Expected, Nonfarm Payrolls At 209,000 For July
July’s reading of the US Institute of Supply Management’s (ISM) Non-Manufacturing Index came in at 53.9, down from a prior 57.4 reading and lower than the consensus forecast of 56.9. July’s headline reading is the lowest since August last year. A look into the data revealed that the new orders component fell (to 55.1, lowest since August last year), while the employment reading also decreased from a prior 55.8 to 53.6. Order backlogs remained almost unchanged. The latest headline reading for services was in stark contrast to the manufacturing reading, which came in just slightly below the consensus forecast. Nevertheless, readings are firmly in expansionary territory and despite fading expectations of fiscal stimulus, both manufacturing and services in the US remain robust, which should continue to support growth momentum going forward.
The US economy created 209,000 jobs in the month of July, down from a prior upward-revised 231,000 and beating expectations of an 180,000 print. Manufacturing payrolls rose higher than expected (+16,000 as compared to 5,000 expected). Job gains were seen in professional and business services, education, health care and leisure and hospitality. Consequently, the unemployment rate came in at 4.3% in July, 10 basis points lower than June's 4.4%. Average hourly earnings rose 0.3% month-on-month, up from a prior 0.2% (year-on-year, wages rose 2.5%, higher than the consensus forecast of a 2.4% rise). The labour market in the US remains robust, and we expect the pace of job creation to gradually moderate lower moving forward, as the business cycle matures in the US.
China: July's Manufacturing PMI Falls Slightly, But Overall Growth Remains Stable
At the western end of the Pacific Ocean, China's official manufacturing PMI came in at 51.4 in July, down from a prior 51.7 reading, and falling slightly short of the consensus forecast of a 51.5 reading. July's headline number is also generally unchanged from the average seen in the first half of 2017. Overall growth in the manufacturing industry remains stable, as the production and new orders indices remained in expansionary territory, signalling continued growth in the industry. However, the raw materials inventory and employment components dipped into contraction, reflecting a reduction in primary raw material inventory and employment level. Going forward, we expect manufacturing momentum to remain stable given the stabilisation of China's economy.
South Korea: Exports Recorded Double Digit Year-On-Year Growth For The Sixth Consecutive Month
South Korea’s exports increased by 19.5% year-on-year in the month of July, down from a prior downward-revised 13.6% year-on-year increase and beating the consensus forecast of a 15.9% year-on-year increase. July’s exports number is also the sixth consecutive month of double digit year-on-year increases. Exports growth were mainly contributed by the demand for semiconductors, ship construction, iron & steel and petrochemical products; exports to China and the US rose 6.6% and 7.0% respectively, while exports to India grew by a significant 79.2% year-on-year. The outlook for South Korea’s exports is expected to remain positive, given the continued recovery in global economy, as well as the upturn in the global semiconductor industry.
Brazil: Industrial Production Expanded For The Second Consecutive Month
In South America, Brazil's industrial production rose 0.5% year-on-year in June, easing from the prior month's 4.1% but surpassing expectations for a -0.1% decline. Industrial production has expanded for the second consecutive month and is the highest since late 2013, with the exception of the high growth seen in May 2017. This suggests continued progression in the economy in its road to recovery. In terms of the types of goods, the production of durable goods continued to lead growth, with a 5.0% year-on-year increase in output. Meanwhile, the production of semi-durable goods lagged overall production growth as it contracted -1.8% year-on-year in June. According to the latest central bank survey of 100 economists, Brazil's GDP and its industrial production are expected to grow 0.34% and 0.83% respectively in 2017.
|The Research Team is part of iFAST Capital Sdn Bhd
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