Equities Weekly: Equity markets rebound from previous week

Equity markets on aggregate, as represented by the MSCI AC World Index, fell 0.16 per cent over the week ended May 26, 2017 although investment sentiment rose across financial markets worldwide.

The US equity market, as represented by the S&P 500 Index, posted a new record high, rising 0.21 per cent over the week, while across the Atlantic, European equity markets saw a pullback from the previous week, with the benchmark Stoxx 600 Index decreasing 1.37 per cent.

Japanese equities, as gauged by the Nikkei 225 Index, fell 0.64 per cent over the week. The strengthening of the Ringgit has weighed upon some of the indices return, pulling return figures towards the red territory.

Our local currency has strengthened by 1.3 per cent against the US dollar over the week.

Emerging and Asian equity markets as a whole also followed their developed counterparts, with the MSCI Emerging Markets Index rising 0.91 per cent over the week while the MSCI Asia ex Japan Index posted a 0.70 per cent gain.

China’s offshore equity market (as gauged by the HSML 100 Index) registered a 1.36 per cent gain over the week, while the mainland’s CSI 300 Index trailed with a 1.12 per cent gain.

Hong Kong’s Hang Seng Index rose 0.48 per cent, while Taiwan’s equity market retrenched -0.32 per cent over the week.

The South Korean equity market continued its march higher since the latest elections, with the KOSPI posting a 1.46 per cent gain over the week.

In Southeast Asia, the Lion City’s equity market fell by 0.78 per cent from the previous week, but Thailand’s and Malaysia’s equity markets saw gains of 0.93 per cent and 0.23 per cent respectively over the week.

Brazil’s equity market, rocked by the news of an alleged corruption scandal of its president over the past week leading to a knee-jerk sell off previously, rebounded by 1.71 per cent over the week.

In the coming week, investors would be on the lookout for the release of the US Conference Board’s consumer confidence data, nonfarm payrolls data as well as the ISM Manufacturing PMI to gauge the health of the US economy.

Markit is scheduled to release UK’s manufacturing and construction PMIs for the month of May, while France’s preliminary 1Q 17’s GDP is also scheduled to be released.

Investors would also be on the lookout for the release of China’s manufacturing and non-manufacturing PMI data for the month of May, while 1Q 17 GDP data for India is also out this week.

Japan: April’s exports growth came in below consensus estimates

In East Asia, Japan’s exports grew 7.5 per cent yearon-year in April, down from a prior 12.0 per cent yearon-year increase and below consensus estimates of an 8.0 per cent year-on-year rise, marking the fifth consecutive month of year-on-year increases in exports.

The data was mainly driven by semiconductors exports, which includes products like electronics component, scientific optical instruments and metalworking machines.

A look at each export destination revealed that exports to the US rose 2.6 per cent year-on-year, exports to the European Union (EU) rose 2.2 per cent year-on-year, while exports to China surged 14.8 per cent year-on-year, recording the highest single month growth in April.

As we expect the Japanese Yen (JPY) to continue remaining weak coupled with the steady momentum in the global economy, the outlook for Japan’s exports growth remains positive.

Taiwan: April’s export orders fell below expectations

South of Japan, Taiwan’s export orders rose 7.4 per cent year-on-year in April, marking its ninth consecutive month of expansion, but down from a prior 12.3 per cent year-on-year increase and falling short of consensus estimates of a 13.0 per cent year-on-year increase.

The data fell short primarily due to the fact that the electronics segments sector is currently in its off-season period; product inventory adjustment period as well as product transition period in April.

A look at each export destination revealed that exports to the US rose 6.0 per cent year-on-year, while exports to China and Hong Kong rose 13.8 per cent year-on-year in April.

However, exports to Asean countries fell year-onyear by a rather significant 15.1 per cent, as foreign manufacturers decided to diversify their businesses and made adjustments to orders.

We expect Taiwan’s exports orders to continue its increase as global demand for semiconductors remain strong.