Bursa: Malaysian ETFs rebound after three-month contraction

Bursa: Malaysian ETFs rebound after three-month contraction
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Below are the trading highlights from the July 2022 exchange-traded fund (ETF) performance report:

Following three months of contraction, trading activities in the ETF space rebounded in July (value: RM5.5 million; volume: 2.3 million units) from a year-to-date (YTD) low in June (value: RM4.34 million; volume: 1.86 million units), bringing the total YTD value exchanged to RM62.8 million and volume to 26.1 million units. Despite the month-on-month (m-o-m) improvement, activities were still below the YTD average (value: RM9 million; volume: 3.7 million units).

At the macro level, trading sentiment during the month was still dominated by fears surrounding the inflation-induced tightening monetary policies by global central banks, and the subsequent rising risk of a global recession. From a technical point of view, the local equity market was in an oversold condition towards the first half of July, and both the FBM KLCI and the FBMSC (FTSE Bursa Malaysia Small Cap Index) flashed out positive relative strength index divergence signals, setting the stage for a rebound over the past few weeks.

The ringgit-priced China-focused equity ETFs (CHINA100-MYR and CHINAETF-MYR) continued to dominate trading activities. On a combined basis, CHINA100-MYR and CHINAETF-MYR contributed 51.3% of the YTD value traded, and 41.4% of the volume. Both securities also contributed 126% of the m-o-m value gain in the ETF sector, and 137% of the volume gain. The improved trading activities can be attributed to the rebound in China equities during the month, as the news flow suggested more accommodative macroeconomic policies by the Chinese government. It is worth noting that, while both CHINAETF-MYR and CHINAETF-USD track the same underlying index, namely the S&P New China Sectors Ex A-Shares Index, trading activities were skewed towards the ringgit-denominated variant.

Trading activities in the GOLDETF rebounded from the lowest YTD level, with the value traded picking up 63.6% m-o-m, the second lowest monthly trading level on a YTD basis. Activities rebounded, as the underlying asset (LBMA Gold Price AM) approached the lower bound of its 22-month sideways trading. Despite the underlying asset’s YTD (July) decline of 2.24%, the GOLDETF, which is traded in ringgit, posted a 3.99% gain over the same period, largely on the depreciation of the local note against the US dollar. From the cross-asset perspective, the underlying asset also enjoyed a tailwind since the second half of July, following a technical pullback in the greenback.

Bursa Malaysia