Market Review and Outlook
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Global Overview
Global capital market performance was mixed in Q1 2021, with global equities extending gains, while the global bond prices broadly declined amid continuously supportive fiscal and monetary policy actions worldwide. Specifically, the passing of the US$1.9 trillion American Rescue Plan, the prospects of faster economic recovery in advanced economies, and accelerating vaccine deployment in a number of major economies bolstered investors’ confidence.
In global equities, the MSCI World rose as much as 5.2% from the start of the year to reach its record high on 15 February 2021, on prospects of a stronger economic rebound in advanced economies. Gains, however, were tempered slightly by the end Q1 2021 to close the period 4.5% quarter-on-quarter (q-o-q) higher (Q4 2020: 13.6%) given concerns of potential overheating of the US economy, and the resurgence of global COVID-19 numbers. Likewise, the MSCI Emerging Markets initially rallied by 11.9% on 17 February 2021 from beginning of 2021, but ended the period by a marginal 1.9% q-o-q increase in Q1 2021 (Q4 2020: 19.3%). Advances in the emerging markets were limited as sentiments wavered slightly amid mounting virus cases and sporadic vaccine distribution in the region. In the US, the S&P 500 index rose by 5.8% q-o-q in Q1 2021 (Q4 2020: 11.7%), with gains mostly anchored by the technology sector and sectors benefitting from reopening of the economy. Similarly, the Euro Stoxx 50 ended the quarter higher by 10.3% q-o-q (Q4 2020: 11.2%) amid brightened global growth outlook, eclipsing worries of surging COVID-19 infections and several fresh lockdowns in Europe. Additionally, the UK FTSE 100 rose 3.9% q-o-q (Q4 2020: 10.1%) despite persistent EU-UK tension. In Asia, the Nikkei 225 rose 6.3% q-o-q in Q1 2021 (Q4 2020: 18.4%).

Meanwhile, the global bond market experienced losses during the quarter, with bond yields climbing to prepandemic levels on concerns that a sharp US economic recovery, induced by large fiscal stimulus could potentially reignite inflation. On the monetary policy front, the US Federal Reserve (Fed) in its Federal Open Market Committee (FOMC) meeting on 16 and 17 March 2021 pledged that it would keep rates near zero at least through 2023, while maintaining the current pace of its asset purchases programme. Other major central banks such as the European Central Bank (ECB), Bank of England (BOE) and Bank of Japan (BOJ) also reiterated their commitments to retain an accommodative interest rate environment. The US Treasury 10-year (UST 10Y) yields increased by 83.4 bps q-o-q to 1.75%, the highest since January 2020 (Q4 2020: 23.5 bps). Tracking the UST 10Y yields momentum, the German bund 10-year yields rose by 27.8 bps q-o-q to -0.30% (Q4: -5.5 bps), while the UK Gilt 10-year yields added 64.9 bps q-o-q to 0.85% in Q1 2020 (Q4 2020: -3.5 bps). In Asia, Japan 10- year government bond yields rose modestly in comparison to other major markets, by 7.4 bps q-o-q to 0.10% (Q4 2020: 0.5 bps), given the central bank’s yield curve controls. Likewise, the EM sovereign bond yields ended mostly higher during the quarter.
Table 1
Performance of global equities by selected major markets

Selected Major Equity Markets (% change from preceding period)


Q4 2020

Q1 2021

MSCI World




MSCI Emerging Markets




S&P 500




Euro Stoxx 50








Nikkei 225




Source: Thomson Reuters Datastream
Table 2
Performance of global bonds by selected major markets

Selected Major Bond Markets
(bps change from preceding period)


Q4 2020

Q1 2021

US Treasury 10-year




German Bund 10-year




UK Gilt 10-year




Japanese Government Bond 10-year




Source: Thomson Reuters Datastream
Domestic Overview
The performance of the domestic capital market was weaker during Q1 2021 against a backdrop of mixed regional performance, as the reinstatement of a Movement Control Order (MCO) weighed on economic activity in Q1 2021. Concern over reflation fears in the global bond market and uneven vaccine distribution in some economies also played on investor sentiment. This was despite positive global economic indicators and the passing of the large US stimulus plan on 11 March 2021, which fuelled a brief recovery in the performance of the local bourse in early March 2021. Meanwhile, the subsequent lifting of the MCO in selected states and introduction of the Strategic Programme to Empower the People and Economy (PEMERKASA) on 17 March 2021 helped limit further losses to the benchmark index.

The FBMKLCI fell by -3.3% q-o-q to 1,573.51 points in Q1 2021 (Q4 2020: 8.1%). Although the benchmark index saw a rebound of 5.3% from its recent trough on 24 February 2021 to a high of 1,689.83 points on 10 March 2021, it has since tapered to end the quarter -6.9% lower relative to its peak. Similarly, the broader FBMEMAS index fell -1.3% q-o-q to 11,614.56 points in Q1 2021 (Q4 2020: 8.9%). In terms of market capitalisation, the overall market capitalisation expanded by 0.8% q-o-q to RM1.81 trillion in Q1 2021 (Q4 2020: 10.0% to RM1.80 trillion), while for FBMKLCI declined by -1.9% q-o-q to RM1.02 trillion (Q4 2020: 7.5% to RM1.04 trillion). Meanwhile, domestic bond yields ended broadly higher, tracking the rapid rise in UST yields. Further selling pressure emerged on the prospects of a higher fiscal deficit following the announcement of PEMERKASA, alongside declining expectation of a further Overnight Policy Rate (OPR) cut. As at Q1 2021, the MGS yield curve shifted upward, with the MGS 10-year yields rising by 59.9 bps to 3.28% (Q4 2020: -7.1 bps).

In terms of capital flows, foreigners remained as net sellers of Malaysian equities, with portfolio funds outflow of -RM1.73 billion in Q1 2021 (Q4 2020: -RM2.29 billion). Cumulatively, retail investors were net-buyers to the tune of RM5.40 billion, while institutional investors turned net-sellers, surpassing foreign investors by RM1.93 billion to -RM3.66 billion year-to-date as at end March 2021. Meanwhile, the local retail participation rate averaged 36.5% in terms of value traded in Q1 2021 (Q4 2020: 36.6%). The bond market meanwhile continued to witness foreign inflows amounting to RM16.73 billion in Q1 2021 (Q4 2020: RM13.46 billion). On the currency front, the ringgit was -3.0% weaker against the US dollar at RM4.15 in Q1 2021 (Q4 2020: 3.2%), in line with weaker regional currencies.
Table 3
Domestic and regional market performance

Regional Indices
(% change from preceding period)


Q4 2020

Q1 2021

Malaysia FBMKLCI




Singapore STI




Thailand SET




Philippines PCOMP




Indonesia JCI




Source: Thomson Reuters Datastream
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