That said, markets have seemingly largely ignored the potential impacts of the epidemic, as countries are resuming normal activities with less restrictions and lockdowns. With economic indicators implying a recovery from the fallouts of the epidemic, the MSCI Emerging Markets Index surged and gained 8.42% in July.

With the extended quantitative easing having no end in sight, we expect excess liquidity to further flow from USD assets to non-USD assets, which provides an upward driving force for emerging markets, in particular emerging Asian markets. Among them, we would focus on the Vietnam market. The frontier market recorded a hefty drop at the end of July, as markets were concerned over the spike in covid cases, after over hundred days without locally transmitted cases. However, we see the drop more like a market overreaction than anything.

With a timely reaction to the situation, we are relatively confident that Vietnam will not see the situation go out of control. In addition, despite the global economic slowdown, the economic indicators in the country recovered to pre-epidemic levels, we find Vietnam’s fundamentals rather solid. This is further bolstered by the Sino-US geopolitical tensions, which benefits the country as the production lines shuffle. IMF sees the country’s economy growing 2.7% this year and returning to 7% next, the sharp fall in Vietnam equities is likely an opportunity for a great upside potential.

One of the longest EU leaders’ summit concluded in late July, and the divergent leaders compromised in the end, clearing the EUR 750 billion Recovery Fund for the European Parliament’s approval with revised terms: 390 billion in grants and 360 billion in loans. This was the first liability pooling under the EU, which is a big step forward to a more connected Europe. However, the fundamental conflicts between the states throughout the summit could prove to be an issue in the future.

As for Brexit, both sides remain miles apart on key issues, possibly implying there will be no trade deals before the upcoming deadline at the end of September. Although EU’s chief Brexit negotiator Michael Barnier mentioned that the EU intended to keep a mutually beneficial relationship with the UK even after the divorce, European corporations already took a no-deal Brexit as given and are planning accordingly. With the massive uncertainty both politically and economically, European markets remain a less attractive investment in the short to mid-term.

With foreign direct investment reducing in China, and trade and exports also constituting a smaller part of the Chinese GDP, the rise of de-globalisation could cause lasting damage to the Chinese economy. According to the latest communication from the Chinese politburo, apart from the ‘six stabilities’ and ‘six guarantees’ emphasized since the outbreak of the epidemic, the Chinese leadership is considering prioritising self-reliance and domestic growth, under the big banner of ‘Double Circulation’ led by the domestic economic cycle. Simply put, the politburo determined that it would be better for China to develop its domestic market in a deeper manner for the long term.

As various economic indicators in China continued to improve, it would be an opportunity to jump on the growth train. Considering the government’s emphasis on the domestic market, prioritizing technological research and reducing reliance on foreign imports, relevant sectors in China should continue to see much growth with governmental help. Therefore, we have a stronger conviction to stay bullish on the new economy sector, eyeing on better upside potential in the mid to long-term.

Vaccine optimism and stimulus expectations were the 2 main driving forces behind the surging markets. The positive progress in various vaccine developments drove anticipation that the global economy could return to normal at a sooner date than originally expected; additional fiscal stimulus is also expected to give a boost to the somewhat struggling economy. To add on that, US President Donald Trump mentioned that the White House is considering a possible payroll tax suspension, further boosting market optimism.

The gradual recovery of economic indicators, with all major PMIs rising to 50 or above, suggests a potential bottom in the economic downturn. In particular, we have noticed that the earnings forecast for both the tech and healthcare sectors began to rebound after the earlier downward revision. Although there might be slight corrections in the short term with the valuations still on the higher end, with surprisingly good quarterly results and a lifted outlook, we continue to stay bullish on these sectors in the long term.

The Bloomberg Barclays Global Aggregate Bond Index were up 3.19%, US Investment Grades gained 3.25%, while Emerging Markets US dollar Bonds and US High-yield bonds also rose 3.12% and 4.69% respectively.

Despite the second wave covid crisis regaining traction across multiple countries, concerns over the epidemic continue to fade out of the spotlight as various economic indicators improve, and markets look forward to the much-anticipated v-shaped recovery as vaccine hopes go high. Corporate confidence improved, and credit markets seemingly forgot about the ongoing fiscal support from the governments that keeps various corporations afloat, which might be a concerning risk factor if one were to invest blindly.

Even though credit markets have generally improved, Fitch ratings have warned of a 5% default rate in high yield bonds over the year, underpinning the heightened innate risks in the credit market; With market optimism running high, investors might also want to seek hedging against the heated market. In both cases, selection is still very important. Avoid issuers from sectors expected to suffer lasting damage from the covid fallout, and stay away from emphasising on the past financial records, only pick issuers with solid financials unaffected by the pandemic.

US

The number of covid cases exceeded 20.9 million globally, of which the United States accounts for more than a quarter of total cases. Despite the serious epidemic situation, the US economic data seems to indicate a strengthening local recovery momentum. The latest number of new jobless claims has fallen below the 1 million mark for the first time since the start of the outbreak. The US stock market remains in an upward trend, the Dow and the S&P 500 index rose 1.86% and 0.72% respectively over the past five trading days ending Thursday, while the NASDAQ fell 0.59%. Russia announced registry of its first COVID-19 vaccine. While the market remains hopeful that the vaccine could help control the epidemic, there are also worries that the vaccine's usage may restrict the current dovish policies of global central banks. Regarding Sino-US trade relations, it was reported that senior officials of both countries will evaluate the implementation of the first phase trade deal around 15^th August.  As for spot gold, while it did briefly hit a record high, gold prices subsequently plummeted on August 11, setting a record for the largest single day decline over the past seven years. At the time of writing, spot gold sits at $1948 per ounce. Next week, the United States will release the minutes of the Fed July interest rate meeting.

Europe

The latest focus in Europe remains on the Brexit talks, markets are still speculating whether the UK and EU can reach an agreement before the September deadline. Positive news and data continue to pour in, supporting European equities, the UK, French, and German indexes rose between 2.63% and 3.22% over the past 5 trading days ending Thursday, outperforming global markets. After the UK Prime Minister Boris Johnson and Irish Prime Minister Micheál Martin met on Friday, both expressed optimism about a zero-tariff trade agreement between the UK and EU. Next week, the Eurozone will announce the initial value of the August manufacturing PMI and the finalised July CPI.

China

Over the past week, the margin trading balance growth has slowed down, resulting in weaker performances in both the Shanghai and Shenzhen stock markets. The CSI 300 Index fell slightly by 0.07% over the week, while the Hong Kong equities had a better week, the Hang Seng Index gained 2.66% over the same period. In terms of economic data, China's industrial production maintained a positive growth of 4.8% YoY in July; retail sales were weaker, falling 1.1% YoY over the same period, but the decline was less severe than the previous month; the YTD figure in July fixed investment ex rural areas also saw improvement over previous months.  China will announce the LPR (Loan Prime Rate) next week, market expects both the 1-year and 5-year rates to remain unchanged.

US

The latest earnings season in the US is coming to an end. Among the 440 S&P 500 companies that have reported, around 84% of them beat market expectations. Over the past trading 5 days ending Thursday, the Dow and the S&P 500 were in the green for 5 consecutive trading days, gaining 4.08% and 3.17% respectively over the period; the Nasdaq even rose for 7 consecutive trading days and hit a new record high. Although the US Republicans and Democrats are still divided over certain key issues in the new stimulus bill, the overall negotiations still made progress. Together with US ISM manufacturing index improving and beating market expectations, the stock markets rallied. US Fed Vice Chairman Richard Clarida said that the Congress stimulus bills will help the US economy rebound in the second half of the year. It is worth mentioning that the US dollar index stayed weak, hitting a low of 92.52 on Thursday, the lowest level since May 2018; the price of gold continued to rise. At the time of writing, the spot gold price crossed $2,070 per ounce, continuing to set new record highs. The United States will release data on CPI and retail sales next week.

Europe

European equities followed the global markets and went up. The UK, French, and German equity indexes rose between 1.73% and 2.19% over the past 5 trading days ending Thursday. The latest quarterly earnings season in Europe is also coming to an end. Among the 342 STOXX 600 companies that have reported, about 63% beat market estimates, which is slightly lower than the 84% of the S&P 500. In particular, companies such as BMW recorded quarterly losses, while Commerzbank and Allianz also recorded steep falls in net profits. The Bank of England will hold the interest rate meeting next week, the market is looking for be any hints on possible interest rate cuts.

China

China and Hong Kong stock markets lagged behind Western markets. The CSI 300 Index only rose 0.27% over the week, while the Hang Seng Index fell 0.26%. US President Donald Trump signed an executive order prohibiting US companies and individuals from doing business with TikTok's parent company and WeChat. The news triggered market concerns over related sectors, relevant shares also saw sharp drops. China's export data in July improved, rising by 7.2% YoY in dollar terms, while market expected a decline of 0.6%. Next week, China will announce July data on fixed investment, industrial production, retail, and CPI.

US

Although the United States just announced that its 2020 Q2 GDP fell 32.9% QoQ annualised, which was the largest drop on record, several tech giants such as Facebook, Apple, Amazon, and Google’s parent company Alphabet still announced earnings beats, driving the tech sector up. Over the past 5 days ending Thursday, the S&P 500 and the NASDAQ rose 0.33% and 1.21% respectively, while the Dow fell 1.27%. The covid epidemic in the US remains severe, the number of covid deaths in Texas reached a new record high. After the interest rate meeting, Fed Chairman Jerome Powell pointed out that more fiscal policies are needed to stimulate the economy, and the idea of hiking rates is completely off the table. On the other hand, US President Trump tweeted the idea of ​​postponing the November elections, but congressmen from both parties opposed the idea, and he does not have the relevant power to actually postpone the elections. Finally, it is worth mentioning that the US dollar index has fallen and reached its lowest level since May 2018, while the gold price has hit a record high. The US will be releasing the latest employment figures, market expects that the Nonfarm Payrolls in July will fall to 1.635 million.

Europe

European stock markets slightly underperformed. The UK, French, and German equities fell between 3.57% and 5.52% over the past 5 days ending Thursday, lagging behind global markets. As the epidemic continued to ravage across the globe, the European Central Bank required European banks to suspend dividends and stocks buybacks before the end of 2020 in order to maintain financial stability. Germany’s GDP fell by 10.1% in 2020 Q2, while the Eurozone’s GDP fell 12.1% QoQ, both setting new record lows. The Eurozone consumer price index in July rise 0.4% YoY. The Eurozone retail sales data will be announced next week.

China

A-shares performed better this week, with the CSI 300 Index rising 4.2% over the week; Hong Kong stocks were slightly worse, falling 0.45% over the same period. China announced satisfactory industrial profits in June, which rose 11.5% YoY. As for the official manufacturing index in July, it came in at 51.1, which was higher than the previous figure of 50.9; However, the July non-manufacturing index was 54.2, slightly lower than last month’s figure of 54.4. On the other hand, the HKD continued to show strength, and the HKMA intervened in currency market twice on Thursday, selling more than 4.6 billion HKD in total. China will announce its July data on imports and exports, foreign reserves, and Caixin manufacturing PMI next week.

United States

Early trials of numerous covid vaccines showing positive results, coupled with a slight slowdown in the spread of the second wave in the US, the S&P 500 hit a new record high during the week. However, triggered by poor employment data, investors became more concerned about a slowdown in economic recovery. US equities fell on Thursday, wiping out gains over the past few days. The total number of covid cases worldwide has exceeded 15.5 million, of which the US accounted for more than 4 million. Trump even announced the cancellation of the Republican Party conference in Florida. In terms of data, the number of jobless claims in the US unexpectedly increased to 1.416 million, above the market expected figure of 1.3 million, this news had a negative impact on the stock market. Next week, the US will hold an interest rate meeting. The preliminary 2020 Q2 GDP will also be announced, market expects a QoQ decline of 34% annualised.

Europe

European stock markets have not seen much movement in the past few days. The UK, French, and German stock markets just fluctuated over the past 5 days ending Thursday. Earlier, EU leaders finally reached an agreement over the 750 billion Euro Recovery Fund. This fund consists of grants totalling 390 billion euros and an additional 360 billion euros in low-interest loans. In terms of economic data, the Eurozone consumer confidence index in July unexpectedly fell to negative 15, lower than the June figure of negative 14.7, the market originally expected it to further improve to the negative 12 level. Next week, Europe will announce the 2020 Q2 GDP, June unemployment data, and the July consumer price index.

China

Sino-US relations grew tenser by the day, gradually reversing the market's optimistic sentiment. The Shanghai and Shenzhen stock markets went down on Friday and erased gains over the week. The CSI 300 Index fell by 0.86% this week; the Hang Seng Index also recorded a 1.53% decline. The Hang Seng Indexes Company announced earlier that the new Hang Seng TECH Index, described by many as the "Hong Kong NASDAQ", will be launched on July 27, the announcement pushed the related technology stocks up. However, as tensions build between China and the US, market sentiment deteriorated, and the overall stock market fell. China will release data on June industrial profits, and the official manufacturing PMI in July next week.

US

Although the global covid epidemic is still severe, positive news from vaccine research progress, together with surprisingly good US corporate earnings pushed US equities upwards. Over the past 5 days ending Thursday, the S&P and the Dow rose 2% and 4% respectively, while the NASDAQ slightly retreated 0.7%. According to US pharmaceutical company Moderna, the clinical results of its covid vaccine showed progress, with all patients producing antibodies after the injection, the news lifted spirits in the investment market. On the other hand, the latest corporate earnings period for US equities have just started. Among the 40 companies that have announced corporate earnings, more than 80% beat market expectations. In particular, more than 90% of reporting banks and financials beat analyst estimates, the overall results were fairly satisfactory. In addition, the US House of Representatives Speaker Nancy Pelosi mentioned that the Congress will likely pass another epidemic relief bill in the next few weeks, further improving market sentiment. The US will announce the Markit Manufacturing PMI next week.

 Europe

European equities performed well over the past 5 days ending Thursday, the UK, French, and German equity indexes all rose more than 3%. The European Central Bank (ECB) kept interest rates and monetary policy unchanged after the interest rate meeting. ECB chair Lagarde said that the recovery speed and scale in the region remained very uncertain, so the ECB might need to fully utilise the Pandemic Emergency Purchase quotas. On the other hand, the European Union will hold a leaders’ summit during 17-18 July and discuss the 750 billion Euro economic recovery plan, Lagarde expects the EU Recovery Fund to be approved. The Eurozone will announce the Markit Manufacturing PMI and Consumer Confidence Index next week.

China

The China and Hong Kong markets saw large fluctuations over the week, the A-share market in particular experienced a sharp correction after an earlier surge, surprising markets. The CSI300 index reached a 5-year high of 4800 points at one point but subsequently fell, the HSI also retreated to the 25,000 level. As the total margin balance in China increased sharply and was close to 1.4 trillion yuan, both the China Securities Regulatory Commission and the China Banking and Insurance Regulatory Commission voiced concerns over off-site funding and indiscriminately increasing leverage, speculation in the market subsequently cooled. As for economic data, China's latest 2020 Q2 GDP beat market expectations, recording a YoY growth of 3.2%, bouncing back from the contraction of 6.8% in Q1. China will announce the LPR interest rate next week.