Equities Weekly: Subdued Equity Markets Performances After A Week Of Gains [01 Dec 2017] December 5, 2017
Equities Weekly: Subdued Equity Markets Performances After A Week Of Gains [01 Dec 2017]
Author : iFAST Research Team

Equities Weekly: Subdued Equity Market Performances After A Week Of Gains [1 DECEMBER 2017]

Equity market performances were subdued over the week ended 1 December 2017, with the MSCI AC World Index falling a slight -0.55%. Amid optimism over tax reform and positive economic data, the US equity market, as represented by the S&P 500 Index, rose 0.95% over last week and was the best weekly performer amongst markets under our coverage. Meanwhile, Japan’s Nikkei 225 Index gained a smaller 0.21% and Europe’s Stoxx 600 Index dipped -1.44% over the week. The returns of Emerging and Asian equity markets fell back into the red last week, with the MSCI Emerging Market Index and MSCI Asia ex Japan Index declining -3.87% and -3.91% respectively over the week.

In East Asia, China’s onshore CSI300 Index and Shanghai Composite Index extended their losses from the prior week with a -3.12% and -1.63% decline, while the offshore HSML 100 Index fell a greater -4.37%. Hong Kong’s, Taiwan’s and Korea’s equity indices as represented by the HSI Index (-3.27% weekly loss), TWSE Index (-2.98% weekly loss) and KOSPI Index (-3.24% weekly loss) too were met with losses. In Southeast Asia, equity market performances were mixed, with Malaysia’s KLCI Index seeing weekly gains of 0.04%. Meanwhile, Thailand’s SET Index, Singapore’s STI and Indonesia’s JCI index lagged with -0.21%, -0.39% and -2.67% respectively.

In other emerging markets, losses over the week ended 1 December 2017 had replaced gains seen the week before. India’s SENSEX Index, Russia’s RTSI$ Index and Brazil’s Bovespa Index, saw losses of -3.06%, -3.37% and -4.00% respectively over the week. The prices of the WTI crude oil dipped -1.57% over the week to USD 58.36 per barrel, contributing to the weaker performance of markets dependent on the energy industry.

Economic Calendar:

In the coming week, the US will be releasing its November nonfarm payrolls data (increase is expected to be smaller than that in October) and unemployment rate (expected to remain unchanged from October, at 4.1%). Meanwhile, the Eurozone will be releasing its GDP data for the third quarter of this year, with Germany and France releasing its industrial production figures for the month of October as well. Over in Asia, eyes will be on Japan’s 3Q 2017 GDP figures as well as China’s CPI and PPI data for the month of November.

[All returns in MYR terms unless otherwise stated]

Investors may refer to Market Valuation As Of 1 December 2017 for more details.

US: Consumer Confidence Beats Expectations And Continues To Rise

According to New York-based Conference Board, consumer confidence in November came in at 129.5, up from a prior upward-revised 126.2 reading and beating consensus estimates of 124.0. The latest headline reading is a cycle-high, not seen since December 2000. The Conference Board also reported that the present situation survey came in at 153.9, up from a prior upward-revised 152.0, while the expectations gauge also rose higher in November from October (coming in at 113.3). A greater share of respondents indicated willingness to ramp up purchases of big-ticket items, as well as intentions for vacations. More consumers also expect business conditions to improve and more available jobs. With consumer sentiment robust, the outlook for domestic consumption in the US remains supported.

Germany: Consumer Confidence Readings In Line With Expectations

Germany’s GfK (Society for Consumer Research) in Nuremberg reported that its consumer confidence reading came in at a 10.7 reading, in line with consensus forecasts, remaining unchanged from the prior month. The recent headline reading has decreased slightly from its year-to-date high of 10.9 (recorded in September), but remain close to its cycle high. Looking at the sub-components, business expectations have risen, while the consumer’s ‘willingness to buy’ decreased slightly from the prior month but remain at relatively high levels. The ‘willingness to save’ component has steadily decreased year-to-date, boding well for the outlook for domestic consumption. Other recent economic data points indicate that growth momentum remains intact, helping Germany to contribute to the continent’s overall growth this year.

Japan: October’s Consumer Price Inflation In Line With Expectations

For the month of October, Japan’s consumer prices rose a slight 0.2% year-on-year, down from prior month’s 0.7% but was on par with expectations. The slowdown was largely due to higher fresh food prices over the same period the year before. Excluding the prices of fresh food, consumer prices rose 0.8% year-on-year, up from prior month’s 0.7% increase, in part due to higher energy prices. Japan’s inflation has generally remained at levels above that seen in 2016, with the improvement in CPI being more apparent when excluding the prices of fresh food. Nonetheless, consumer price inflation continues to be significantly lower than the central bank target of 2.0%. Through 2017, Japan’s labour market has continued to tighten, with unemployment rate falling to recent history lows while retail sales have improved from their levels in 2016. Over the coming quarters, it would be unsurprising that a continued gradual increase in inflation be witnessed.

China: November’s Manufacturing PMI Moderates But Remains In Expansionary Territory

For the month of November, the China’s Caixin manufacturing PMI came in at 50.8, down slightly from prior month’s 51.0 reading and had just missed expectations of a 50.9 reading. Nonetheless, November was the sixth consecutive month for which the Caixin PMI had come in above the neutral 50.0 reading, signalling underlying resilience in the nation’s manufacturing sector. An increase in the purchases of raw materials, albeit marginally, was also witnessed, thus signalling further growth in manufacturing activity. While the rate of manufacturing expansion has moderated in the recent months, the official manufacturing PMI reading has picked up unexpectedly. With industrial profits also remaining strong, it remains likely that both manufacturing expansion, as well as domestic economic momentum, remain supported over the coming quarters.

Brazil: Broad-based Economic Improvement In 3Q 2017

In 3Q 2017, the Brazilian economy expanded 1.4% year-on-year, above expectations of a 1.3% growth and was up from prior quarter’s upward-revised 0.4% growth. Growth was broad-based, with almost all GDP components seeing better year-on-year growth than they did in the prior quarter. In particular, domestic consumption, which accounts for around 60% of the nation’s GDP, extended its sharp upturn with a 2.2% year-on-year growth, up from prior quarter’s 0.6% growth. Additionally, investment dipped a smaller -0.5% year-on-year after having fallen -6.7% in the prior quarter, as business confidence recovered partially from the shock induced by the political scandals which began in May 2017. While political instability continues to present a risk to the pace of the nation’s growth, it is likely that growth continues to improve over the coming quarters as economic momentum becomes increasingly entrenched.

Russia: November’s Manufacturing PMI Signals Continued Recovery In Industrial Production

For the month of November, Russia’s manufacturing PMI came in at 51.5, up slightly from prior month’s 51.1 reading but had missed consensus expectations of a 51.8 reading. While the nation’s manufacturing PMI has moderated from its highs at the beginning of the year, it has largely been in expansionary territory since mid-2016, signalling good recovery in the nation’s manufacturing sector. The increase in production in the month was largely due to greater order volumes amid stronger demand. Business confidence had also remained robust amid new product developments and the acquisition of new clients. Over the coming quarters, it is likely growth in the sector remains supported amid the ongoing recovery in both domestic and external demand conditions.

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