September 2020 Commentary
After the furious market rally following March 2020’s COVID-induced low, equities finally took a breather and retraced some of those gains. The Wahed FTSE USA Shariah ETF was up 67% from March 23rd’s low through the end of August (the S&P 500 was up approximately 58% during the same period); September saw U.S. stock markets drop approximately 4%.
Emerging market stocks performed better during the month, anchored by China’s ability to successfully contain the spread of the coronavirus.
Exuberance in gold prices also cooled off in September as the metal broke the $1,900 price mark and struggled to stay above. Gold has still rallied just under 24% year to date and remains one of the strongest performing asset classes.
Eyes continue to be on how well nations can contain coronavirus cases, as well as the development of a vaccine; the United States continues to lead the world in cases and deaths while Europe has seen spikes in cases as a second wave has hit major cities.
The U.S. presidential elections are also front and center of market watchers as former Vice President Joe Biden continues to lead the polls ahead of incumbent President Trump (as of the time of this writing, both candidates engaged in a heated first debate and President Trump as well as the First Lady have tested positive for COVID-19).
The KLCI declined for a second consecutive month in September after closing above the 1600 level a few times in late July, closing the third quarter at 1505. The favored gloves sector saw a second month of little to no movement as news on developments of vaccines for COVID-19 become increasingly frequent. Foreign funds remain net seller with outflow year-to-date at RM22.3 billion, while interest in mid and small caps from local retail investors are expected to fade as the blanket loan moratorium ended on 30 September 2020.
Domestically, the elevated political instability and the implementation of a Targeted Enhanced Movement Control Order are exerting risk on factory operations and investment decisions. The beginning of the third wave of COVID-19 infections currently will also temper the recovery of local activities in the coming months.