Malaysia and global market summary for August 2024.
Global
The Bank of Japan’s (central bank of Japan) surprise interest rate hike to 0.25% led to a sharp appreciation in yen (JPY).
Global markets experienced a sell-off due to forced margin selling from carry trades (borrowing in yen to invest in higher-yielding assets) & US labour data causing recession fears.
US
US unemployment numbers increased (4.3%) and slowing manufacturing initially raised concerns about potential recession.
US Feds statements indicate high likelihood of interest rate cuts as inflation heads downwards.
USD declined -4% as markets price in the rate cuts.
US mega cap tech companies (aka Magnificent 7) declined to become less dominant with other US stocks rising instead.
Malaysia
Ringgit (MYR) strengthened to 4.3 against the USD influenced by global dollar weakening and stronger growth outlook in Malaysia with Malaysia's exports growing the fastest in close to 2 years.
Malaysian stock market also rising with local institutional buying, foreign funds inflow, and a stable government amidst political instability in Southeast Asia.
Malaysia’s credit rating may also be upgraded with improving economic growth and reduced fiscal debt according to the Malaysian Institute of Economic Research (MIER).
China
People's Bank of China rate cuts underscore the urgency to support the slowing economy with prolonged property market slump, and weak consumer spending.
Overall growth is continuing its upwards trajectory with a 5% growth in 2024 1H, & local state-owned entities to convert unsold property into affordable public housing.
Alternative Investments
Bitcoin & Ethereum rise as investors grow confident Fed will cut rates with Bitcoin ranged tightly between USD57,000 & USD61,000.
Gold hovered above the US$2,500 per-ounce level on expectations of imminent US rate cuts & lingering concerns about the Middle East conflict.
Overall
Investment markets were highly volatile in August, but markets started recovering as recession fears abate, and the Bank of Japan will not rush to raise interest rates (although it will continue to monitor and raise rates as long as it meets their views of inflation).
The recent volatility presented a potential buying opportunity with investors regularly investing and/or investing additional funds during the market dip. US interest cuts are viewed as positive with investment funds expected to come out from USD cash as rates drop and flow globally including into Asia Pacific. Markets are expected to further recover although to expect a bumpy ride ahead and keep an eye out for known risks such as ongoing regional conflicts.
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