The uncertainty that caused the delayed recovery

 22 May 2021

Dear Fellow Investor,

Recovery delayed

As mentioned last week the recovery has been delayed with uncertainty about the new Malaysian lockdown and increased Asian/Malaysian  infection rates and has caused the KLSE,  SGX  and most Asian markets to be under pressure.   In today’s Star there was some rare good news. It was reported that the country’s Covid 19 vaccinations recorded its fastest rate on Wednesday with more than 80,000 shots administered. This was the highest daily figures since March 2. So far 2,236,695 Malaysians have received a vaccine dose.  

A second round of vaccinations of Astro Zeneca Covid 19 will be open for registration on noon Sunday 23 May.  Bookings for vaccination slots can be made via the website at https://www.vaksincovid.gov.my/

I personally have had my first dose of Phizer and the procedure was efficient and well administered by GH staff at a community hall in Kajang. The only side effect was a slight soreness in my arm.

The inflation story has effected sentiment and is on the radar of most market participants. The fear is higher interest rates which could trigger equity market collapse. 

This will hurt growth and technology shares especially those that are highly geared.  

However; the 10 year US T Bond yielded 1.62 % on Friday little changed for the week signalling equities/bonds are well supported and inflation is not a major concern among professionals .  

As vaccine rollouts are gaining momentum life is going back to normal especially in Europe, UK, China and US.  Commodity markets which were dramatically rising over the last few months  are topping out. Lumber in the US took a 31 % drop from the high in the last 2 weeks. The same is true with base metals and  agricultural markets.

Lumber futures traded on the CME

Supply chains are opening up and this will increase supplies of essential goods and lessen inflationary spikes.  Freight rates are also topping out as shipping gets back to normal.

Another  piece of good news is Malaysian exports. In March 2021 they were up 31 %, the highest in 44 months.  The trend is up. This will support our export related  shares and the economy in general. 

The reason the US, UK, China  and European markets are doing well and Asia is underperforming is because of high vaccination and slowing infection rates in developed countries. Asia will follow. Action is being taken.  The politicians are finally waking up to reality.

Take care and keep safe

Bill

2021 Gold Eagle  The ultimate inflation hedge.