Global equities started the New Year with a bang, with all major regional markets contributing to the strong showing of a 1.0% gain in the MSCI AC World Index. In the developed markets, Japan led the gains with a strong 1.9% return over the course of the week, followed by US and Europe which returned 0.9% and 0.6% respectively.
Asian and Emerging market equities also contributed strongly to the performance of global equities, with the MSCI AC Asia ex Japan and the MSCI Emerging Market index rising 1.8% and 2.0% respectively. Strong gains were seen across most sub-regions, with Greater China, Latin American and Emerging Europe doing well. In Greater China, Chinese equities rose 2.4% to end the week as the best performing Asian market, with Hong Kong and Taiwan delivering returns of 1.2% each. Singapore and Thai equities stood out amongst its ASEAN peers, with a 1.9% gain for the latter and a 1.6% return for the former in the first week of trading in 2018. Singapore gained as a better than expected reading of economic growth fuelled positivity in the local bourse. Other single country Asian markets under our coverage also ended the week in positive territory with slightly more muted gains.
In Emerging markets ex Asia, Brazil and Russia delivered outsized gains relative to their other single country peers. The Brazilian Bovespa index rose 4.1% to cap the week as the best performing market under our coverage, while Russia rose 3.9% over the course of the week. Meanwhile, India's SENSEX Index saw a -0.5% fall over the week.
In the week ahead, investors will be on the lookout for economic data pertaining mostly to inflation related data from both developed and emerging markets. For the US, inflation and retail sales will be key to watch for the world's largest economy. In Europe, the regional unemployment rate as well as the minutes from the ECB's December meeting will be published, with the latter expected to shed some light on the discussions regarding the mix between public and corporate bond buying from January and the tapering of quantitative easing after September. Industrial production figures will also be released for Germany as well as the regional Eurozone reading. In the emerging markets, inflation numbers will be released for the key markets of China, India as well as Brazil. Industrial production figures will also be released for India.
[All returns in MYR terms unless otherwise stated]
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Market Valuation As Of 05 January 2018 for more details.
US: December's Payrolls disappoint, ISM Manufacturing Beats Expectations
The last non-farm payrolls for 2017 saw a job creation figure of 148,000 miss expectations of a 190,000 gain. While the latest figure disappointed, November's readings were revised upwards by 24,000 to 252,000. The biggest gains by industries were the healthcare (+31,000), construction (+30,000) and manufacturing (+25,000) industries. With the unemployment rate remaining at a 17 year low of 4.1% and average hourly wages climbing 2.5%, the US economy is still clearly in a growth phase.
December 2017's reading of the Institute for Supply Management's (ISM) Manufacturing PMI came in at 59.7 (the second highest reading registered in 2017), up from a prior 58.2 and above the consensus forecast of 58.2. A breakdown of the data's various components revealed that both new orders and new export orders rose in the last month of 2017, suggesting accelerating domestic and external demand, while readings of employment fell. Supplier deliveries and backlogs rose as well. The underlying components suggest that manufacturing momentum in the US remains supported with improving global demand and better momentum from emerging markets.
China: Caixin Manufacturing PMI Rises In December
In December, China's Caixin manufacturing PMI rose to 51.5, beating expectations of a 50.7 reading and improving from November's 50.8 level. Amongst the major sub-indices, only the raw material inventories displayed a slower growth momentum while the other sub-indices such as production and new export orders displayed improving demand conditions in the manufacturing sector. The most bullish reading came from the new orders sub-index, which registered its highest level in eight months. With the manufacturing PMI continuing to rise, industrial production in China is expected to continue to grow into 2018.
Singapore: 2017 GDP Growth Surprises To The Upside
Based on advanced estimates, Singapore's GDP grew 3.1% year-on-year in 4Q 2017, bringing growth for the full year 2017 to come in at 3.5%. Both figures had surpassed market expectations of 2.6% year-on-year growth and 3.3% growth respectively. The manufacturing sector, which makes up approximately a fifth of Singapore's economy, had been the main driver of growth, as it expanded 10.5% in 2017, up from 3.6% in 2016. Contrastingly, the construction sector had been a laggard, as it contracted -8.1% in 2017, down from a 0.2% growth in 2016. Meanwhile, services producing industries grew 2.5% in 2017, up from 1.0% in 2016. Over the coming quarters, while the manufacturing sector's growth may moderate from its highs in 2017, an increasingly broad-based growth is likely amongst other sectors, leading to sustained economic growth.
India: Manufacturing PMI sees sharpest improvement since December 2012
Nikkei India Manufacturing Purchasing Managers' Index (PMI) rose to 54.7 in December as against 52.6 in November. This is the strongest improvement seen in this sector since the last 5 years. The rise in the indicator could be attributed to the sharpest increase in output and new orders since December 2012 and October 2016 respectively .The increase in output was helped by high order book volumes and improved demand conditions. New Business inflows also led to a sharp rise in job creation, which was the fastest since August 2012. The month of December also saw pressure on manufacturers cost burdens as a result of the introduction of Goods and Services Tax (GST). As such input cost inflation rose to the strongest levels since April and this in turn made firms increase their average selling prices.
|The Research Team is part of iFAST Capital Sdn Bhd
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