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First Plus Market Update 2H April 2021

2H April Global Market Recap

 

15th April 2021 – 30th April 2021

 

New global coronavirus cases increased for the nine straight weeks as a surge in India outweighed declines in most regions. Global cases have reached 153 million on 30th April, according to data from Johns Hopkins University. The worldwide death toll has hit 3.21 million, and U.S. is leading all countries with death toll exceeding half a million.

The U.S. economy grew by 6.4% in the first quarter of 2021 on a year over year basis, mainly driven by personal consumption expenditure which increased by 10.7% in the first quarter. Growing consumer spending was a result of rising consumer spending rate, which soared to 21% from 13% in the previous quarter thanks to a $1,400 stimulus check. Federal Reserve decided to hold its key interest rates unchanged and maintain a $120 billion monthly pace of asset purchase and indicated that they were not yet ready to consider scaling back pandemic support. China GDP registered a record 18.3% year over year growth in the first quarter of 2021, led by exports, retail sales and industry output growth. China's yuan-denominated exports surged by 39% in the first quarter while imports gained 19.3%. Retail sales grew by 34% in March from a year earlier and industrial production increased by 14% on a year over year basis. In China, activities in both manufacturing and service sector slowed but remained in expansionary territory as shown in official PMI data. While the private survey Caixin manufacturing PMI showed that China’s manufacturing sector expanded at a faster pace in April, rising to 51.9 from 50.6 in March, driven by rapid growth in new orders.

China stocks were leading the market in the second half of April supported by strong economic data. The rise was after big corrections in March and the first half of April, when it became increasingly clear that Chinese policymakers were shifting their priority to taming asset bubbles and reducing financial leverage. ChiNext surged by 9.8% in April, Shenzhen Component Index increased by 3.6% in the month and the CSI 300 index rose by 0.2%. Stocks in the U.S. fell in the third week of April when Bloomberg reported that the Biden administration is considering a capital gains tax hike for the rich. While a strong GDP growth data and fresh pandemic low jobless claims sent U.S. stocks to a new record on 29th April. The S&P 500 rose 4%, Dow Jones Industrial Average increased by 3.6% and Nasdaq Composite Index increased 2.2% in April.

The 10-year U.S. treasury yield fell in April, decreasing by 11.45bps, after surging by 82.7bps in the first quarter. The fall in yields reflects renewed demand for government debt after sustained selling in the first quarter, due to worries with rising inflations. The U.S. is set to release their quarterly debt issuance plan in the early weeks of May. China’s interbank rates remains relatively stable without major movements in the month. Major countries’ 10-year government bond yields showed mix performances. The yield curve steepened for tenors longer than 2 years in the past three months while tenors shorter than 2 years drop in the past three months.

Across the board, most major CDS and OAS indices have recovered back to pre-COVID levels as the global economy continues to recover from the pandemic. Huarong’s USD bonds have rebounded after the company announced that they are prepared to make bond payments and the Chinese government’s backing remains intact. However, Moody’s and Fitch downgraded the firm’s credit ratings recently stating the lack of visibility from the government’s support as the key factor.

The dollar index fell in April after three months of continuous rise since the start of the year, hurt by a dip in US Treasury yields as some investors sought the safety of holding government debt. The Chinese Yuan’s appreciation against the dollar has begun to taper since the start of the year after a strong rally from June to December 2020. The Euro gained 2.5% against the Dollar in the month as the purchasing managers’ index for April came in better than expected for the euro zone and indicated that the region’s economic recovery is accelerating.

Brent and WTI crude oil prices rose in April by 5.8% and 7.5% respectively as demand outlook improves and the dollar weakens. The International Energy Agency (IEA) and OPEC made upward revisions to their global oil demand growth forecasts for 2021. Brent and WTI crude oil prices have been recovering since the drop back in March 2020 as global economic recovery continues. Major commodities rose as well as the dollar weakens. The CoreCommodity CRB Index hit a 5 year high with the index reaching levels back in 2015. Meanwhile, Bitcoin price has taken a breather dropping by 3.6%. It is the first time that Bitcoin price drop in a month since its dramatic rise back in October 2020.