Following the conclusion of the French presidential elections, global equities rose a slight 0.15% over the week ended 12 May 2017 as investor optimism over the elections subsided. US and European equities, as represented by the S&P 500 and Stoxx 600 indices, dipped -0.30% and -0.32% respectively, while Japanese equities, as represented by the Nikkei 225 Index, rose 1.51%. Most emerging market and Asian equity markets managed to end the week higher, with the MSCI Emerging Markets Index and MSCI Asia ex-Japan Index seeing gains of 2.52% and 2.22% respectively.
Amongst East Asian equities, South Korean’s KOSPI Index led the pack with a 3.40% weekly gain, with China’s offshore equity market, as represented by the HSML 100 Index, following behind with a 2.98% gain. Meanwhile, China’s onshore equity markets, as represented by the Shanghai Composite and the Shanghai Shenzhen CSI 300 indices, fell -0.55% and rose 0.17% respectively. Hong Kong’s HSI Index also saw a notable gain of 2.70%, while Taiwan’s TWSE Index rose by a smaller 1.06% over the week. Singapore’s STI led Southeast Asian equity markets with a 0.86% gain, followed by Malaysia’s KLCI Index, which gained 0.74%. Indonesia’s JCI Index and Thailand’s SET Index, on the other hand, saw declines of -0.09% and -1.48% respectively. Amongst other emerging markets, Brazil’s Bovespa Index rose 5.95%, while Russia’s RTSI$ Index and India’s SENSEX Index rose 1.35% and 1.44% respectively.
In the coming week, investors would be on the lookout for the US’s housing starts and industrial production figures for the month of April. Apart from this, market participants would also be keeping an eye on GDP figures slated to be released in several economies this week. The Eurozone, aside from its preliminary 1Q 2017 GDP figures, would also be releasing its April CPI numbers. Meanwhile, Japan would be releasing its preliminary GDP numbers for the period January-March 2017 (expected grow 0.5% quarter-on-quarter, up from prior quarter’s 0.3% quarter-on-quarter growth), as well as machine orders and industrial production numbers for the month of March. Closer to home, Singapore will be releasing both non-oil domestic exports (NODX) numbers for the month of April as well as the final estimates for its 1Q 2017 GDP which is expected to come in at 2.7% year-on-year, up from advanced estimates of 2.5% year-on-year.
[All returns in MYR terms unless otherwise stated]
Investors may refer to
Market Valuation As Of 12 May 2017 for more details.
US: NFIB Small Business Optimism Index Met Expectations
According to the National Federation of Independent Business (NFIB), confidence among smaller-sized companies in the US came in at a 104.5 reading in April, better than the consensus forecast of a 104.0 reading and down from a prior 104.7 reading. Among the data components, hiring plans remained the same from March, but more firms are expecting higher sales and feeling that it is a good time to expand. 16% of small business owners cited the difficulty of finding qualified workers as their single most important issue that they face. Confidence readings have moderated lower year-to-date but still remain at cyclical highs, but we have yet to see a translation of an increase in business confidence into hard-data gains (rise in capex and investment).
Germany: Industrial Production In March Makes Gains
The German Federal Statistics Office in Wiesbaden reported that industrial production in Germany rose 1.9% year-on-year, down from a prior downward-revised 2.0% year-on-year rise and falling short of the consensus estimate of a 2.5% year-on-year increase. On a month-on-month basis, industrial production fell -0.4% as compared to the consensus forecast (of -0.7%), down from a prior downward-revised 1.8% gain. Manufacturing & mining, intermediate and consumer goods rose year-on-year in March, driving the headline number. Factory orders in March were encouraging (coming in above expectations) as demand from the Euro-zone rose; the overall healthy trend is expected to continue contributing positively to Europe’s overall industrial production.
France: Business Sentiment Continues To Rise
The Bank of France’s business sentiment reading for April came in at 104, above the consensus forecast of a 103 reading and up from 103 in March. April’s reading is the highest reading recorded year-to-date and also the highest since May 2011, almost 6 years ago. A breakdown of the data’s components reveals that deliveries and orders have risen in April. The improvement of business sentiment bodes well for the outlook of corporate investment as well as consumption. With the victory of pro-EU centrist candidate Emmanuel Macron in the recent Presidential Elections, political risk premiums in France’s and Europe’s asset markets have declined, with attention now likely to shift back to economic data, which at this juncture, is indicating that economic momentum in Europe is increasingly entrenched.
China: April’s PPI Extends Downward Trend
On a year-on-year basis, China’s April PPI rose 6.4%, down from prior month’s 7.6% increase and missed expectations of a 6.7% increase. On a month-on-month basis, producer prices fell for the first time 10 months in April and declined -0.4%. In line with the decline in the Caixin PMI figures since the beginning of the year, the increase in producer prices has trended downwards, signalling that China’s industrial production may be losing some steam. In April, the prices of the main drivers of the PPI, mining goods, raw materials and manufacturing goods; continued to see a smaller increase year-on-year. This trend of a moderating industrial production and producer price inflation would likely present a headwind to the economy over the next few quarters should it continue. At this juncture, the economy still stands a good chance of achieving its GDP growth target for the year (around 6.5%) and as at 14 May 2017, expectations are for the country’s GDP growth for 2017 to come in at 6.6%.
Taiwan: Exports Staged Seven Consecutive Months Of Year-On-Year Growth
As recently released by Taiwan’s Ministry of Finance, the country’s April exports had grown year-on-year for the seventh consecutive month. In April, although the growth in exports had missed economist estimates of a 10.7% year-on-year increase, the growth in exports still came in at a significant 9.4% year-on-year on the back of continued strong semiconductor demand. In terms of exports to countries, April’s exports were primarily driven by the exports to Asian countries such as Malaysia, Thailand and South Korea, to name a few, which grew 32%, 28% and 19% year-on-year respectively, while exports to the US also grew a notable 7.6% year-on-year. Looking ahead, the outlook for Taiwan’s exports over the coming quarters remains positive given the continued strong demand for electronic components from China and a continued recovery in the global semiconductors industry.
Brazil: Retail Sales To Continue Declining At A Slower Pace
Brazil’s retail sales fell -4.0% year-on-year in March 2017, down from prior month’s downward-revised -3.7% decline and missing estimates of a -1.8% decline. The fall in March was largely due to the -8.7% and -12.4% year-on-year decline in the sales in the food, beverage & tobacco as well as the office & communication equipment segments respectively. Apart from these two retail sales segments, most of the remaining six retail sales segments continued to show improvement when looking at overall trends. At this juncture, it remains likely that retail sales, although volatile, would continue decline at a slower pace in the coming quarters. That said, the improvement in retail sales can reasonably be expected to be gradual given that the increasing unemployment rate would likely continue to weigh on consumption. Unemployment rate recently rose to a new record of 13.7% in 1Q 2017 and would likely see tepid improvement, if any, in the coming quarters given the gradual pace of economic recovery.