November 2021 Global Market Commentary
Risk assets declined in November 2021, including developed market equities, emerging market equities and sukuk. Global news was dominated by the rise in COVID-19 hospitalizations and the emergence of the new Omicron variant. The sharp increase in hospitalizations was most noticeable in Europe, leading to countries such as Germany and Belgium to impose working from home restrictions while Austria went into full lockdown.
In the US, the consumer price index spiked to 6.2% year-on-year in October 2021. This is the highest reading in 31 years. Meanwhile, Jay Powell retained his seat as the Chairman of the Federal Reserve after he was reappointed for another four-year term. The tapering of the quantitative easing will be carried out to reduce the monthly asset purchases from USD 120 billion to zero by the end of June 2022.
UK economic momentum remained strong as data for consumer confidence and retail sales showed increased resilience. Labor market data for October 2021 continued to strengthen, even as it excluded the government’s furlough scheme. The Bank of England decided to keep rates on hold in November.
In the emerging markets (EM), China macroeconomic data was strong for October as exports surprised on the upside for the third consecutive month, up by 27% year-on-year driven by strong demand from Europe. Domestic retail sales were better-than-expected in October, and is projected to remain strong in November following the record sales generated during Singles Day (11 November). Overall, EM equities declined in November due to COVID-19 concerns.
For Malaysia, GDP for 3Q 2021 contracted 4.5% year-on-year (vs. +16.1% for 2Q 2021), following the reintroduction of a nationwide lockdown during the quarter. The economic weakness is expected to trough in 3Q 2021 before returning to expansion from 4Q 2021 onwards through 2022. Bank Negara Malaysia left the overnight policy rate unchanged at 1.75%, signalling patience on rates due to pandemic uncertainty and lingering impact of prolonged and worsened supply chain disruptions.