Market Commentary – October 2021

October 2021 Global Market Commentary

Global equities markets rebounded in October. US markets reached new highs driven by the strong Q3 earnings season. More than 80% of companies in the S&P Index beat earning expectations, helping the S&P 500 reach a new peak.

In the US, Congress agreed to temporarily raise the borrowing limit, averting the risk of default at least until December. Meanwhile, the Senate gave bipartisan approval to a USD1 trillion infrastructure bill, advancing a key component of President Biden’s agenda.

US GDP growth of 2.0% (year-on-year) for Q3 disappointed due to negative impact from Hurricane Ida and supply-side distortions. Nonetheless, the US economy remains solid and approaching full employment though inflationary pressures are building.

Emerging markets equities were largely unchanged in October. While Chinese indices rebounded, there are lingering fears from Beijing’s planned property tax scheme, rising Sino-US tensions over Taiwan, and inflationary pressures. China’s Q3 GDP growth decelerated to 4.9% (year-on-year) compared to 7.9% (year-on-year) growth for Q2, although the nation is still on track to achieve the projected 6% annual growth rate.

UK equity markets rose in October. The UK unemployment rate fell to 4.5% in October, indicating a strong labour market. The Bank of England is wary of rising wage pressures, potentially leaning for the first interest rate hike this year.

In Malaysia, the local stock market gained slightly in October. While expansionary, with a 9.8% growth in total expenditure compared to the previous year, a one-off prosperity tax of 33% for corporate earnings in excess of RM100 million for the year 2022 is expected to affect market sentiment on the lower bottom-line and potentially, suppress dividends next year.

 

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