Weekly
review
A strong week for US equity
markets following better-than-expected second quarter earnings
reports. The major averages ended on a strong note, rallying
Friday following the release of the highly-anticipated European
banks stress tests results. For the week: Dow Jones +3.2%, S&P
500 +3.5% and Nasdaq +4.1%. However, mid- and small-cap indices
outperformed this week, with the Russell 2000 gaining 6.6%.
IBM
actually led off the week with disappointing earnings results,
missing on the top line, but the major averages managed to
reverse a sharply lower open to close with modest gains. For the
remainder of the week, however, earnings results for the most
part came in positive. Economic issues resurfaced on Wednesday
following the release of Federal Reserve Chairman Ben Bernanke's
semi-annual monetary policy report. He disappointed the market
by focusing on the uncertainty still in the marketplace. While
economic commentary aided the bears on Wednesday, economic data
helped extend gains on Thursday. After the major averages opened
sharply higher following a strong batch of earnings results,
Existing Home Sales showed a smaller-than-expected decline of
5.1% in June, helping U.S. equity markets reach new highs for
the session.
Asian
stocks rose for a third week as commodity prices
gained and as US companies reported or raised profit forecasts,
boosting confidence in the strength of global economic growth.
The
MSCI Asia
Pacific Index climbed 1%, advancing for a
third-straight week and posting the longest winning streak since
the week ended April 16. Hong Kong’s
Hang Seng
Index rose 2.8% this week as the city’s developers
gained on prospects of higher property prices. China’s Shanghai
Composite Index climbed 6.1%. Australia’s S&P/ASX 200 Index rose
0.8%, led by materials companies.
BHP
Billiton, the world’s largest mining company, climbed
4% this week in Sydney. The
London
Metals Exchange Index, a measure of six metals, rose
7% this week, while copper futures for September delivery jumped
8.7% in New York after a report showed sales of previously owned
US homes fell less than forecast in June, bolstering the demand
outlook for the metal. Crude oil for September delivery climbed
3.2%.
Hon Hai
Precision Industry, the world’s largest electronics
contract manufacturer, gained 3.7% in Taipei after Microsoft
Corp. reported positive earnings in the US.
China
Resources Land, a state-controlled developer, soared
6.4% in Hong Kong on speculation China may ease tightening
measures.
The FBM KLCI strengthened last
week, gaining 9.03 points to close at 1,345.68 on Friday.
Defensive stocks in sectors like food & beverages and education
continued to be on a winning streak despite uncertainties in the
global market. Automotive stocks such as Tan Chong Motors and
APM Automotive were also in focus after the Malaysian Automotive
Association said it expects auto sales to hit an all-time high
of 570,000 units this year from an earlier forecast of 550,000.
There was also rotational play into second and third liner
property stocks as fundamentals are strengthening and demand for
physical properties continue to be robust. On the corporate
front, UEM Group said that they will bid for the KL MRT project
should a tender be called for it. Meanwhile, crude palm oil (CPO)
futures strengthened further this week to RM2,498 per tonne on
concerns a brewing La Nina will impact production and drive
prices higher. The CPO futures has rebounded 10% from its recent
low three weeks ago.
Economic news
US: Housing
starts fell in June to the lowest level since Oct 09 as a slump
in sales following the expiration of a government tax incentive
caused builders to cut back. Work began on 549,000 houses at an
annual rate, fewer than the 577,000 median estimates and down 5%
m-o-m in June.Building permits, a gauge of future construction,
rose 2.1% in June to a 586,000 pace, propelled by a 20% jump in
multifamily applications that are often volatile. The ABC
Consumer Comfort Index fell to -45 for the week ended 18 July
from -44 in the previous week, dipping to its lowest level since
13 June, when it read -45. There were 464,000 initial jobless
claims filed in the week ended 17 July, up 37,000 from a revised
427,000 the previous week. The index of leading indicators fell
0.2% in June (+0.5% in May); the second decline in three months,
signaling the world’s largest economy will cool.
Malaysia: The Consumer
Price Index (CPI) for June increased by 1.7% y-o-y to 113.7pts
(1.6% in May). The rise was due to the increase in food and
non-alcoholic beverages and non-food indices by 2.7% y-o-y and
1.1% y-o-y respectively. The international reserves of Bank
Negara Malaysia amounted to RM309.9bn (US$94.8bn) as at 15 Jul
(RM309.8bn or US$94.8bn as at 31 June). The reserves position is
sufficient to finance 8 months of retained imports and is 4.4
times the short-term external debt.
Disclaimer :
Information herein has been obtained from and is
based upon sources Pheim Unit Trusts believe to be
reliable, we do not guarantee its accuracy and it
may be incomplete or condensed. All opinions and
estimates constitute Pheim Unit Trusts’ judgment as
of the date of the report and are subject to change
without notice. This report is for informational
purposes only and is not intended as an offer or
solicitation for the purchase or sale of units.
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