August 9, 2021/Cordros Report

Strategy

Buying interest resurfaced in the local bourse as corporate earnings release began with the declaration of dividend dominating the airwaves. The fixed income yields continued to print lower at the primary market auctions as both the money market and bond instruments recorded lower stop rates in July. As such, we opine that fixed income yields are around their peak levels and we anticipate a similar pattern in August. In line with our outlook, investors are advised to lock in on yields for longer tenor in the fixed income market. On the other, with the positive earnings release, we expect investor to position for dividend yield on fundamentally sound stocks.

Equity

The stellar performance continued in the global equities market in July as 16 of 24 equity indices that we track closed in the green. Across all indicators covered, UAE’s ADX General index (+7.1% m/m) topped the gainers as positive earnings stoked buying interest. Similarly, Kenya’s NSE 20 and Egypt’s EGX 30 indices rose by 5.7% and 4.7% m/m in that order. Conversely, Hong Kong’s Hang Seng index plunged 9.9% m/m as investors reacted to China’s sustained clamp down on Technology companies. In the same vein, China’s Shanghai composite and Japan’s Nikkei 225 indicators closed lower by 5.4% and 5.2% m/m respectively. We anticipate a sustained bulls’ market in August.

Macroeconomics

Due to the rising delta variant across the world, the number of COVID-19 cases rose faster by 8.8% m/m (vs. 6.3% m/m in June) to 198.3 million people in July. Nonetheless, vaccination remains strong, rising by 32.3% m/m to 4.1 billion doses at the end of July. Elsewhere, the global economy remained upbeat as the easing of COVID-19 restrictions and improved vaccination continues to drive further recovery across the world. We maintain a positive outlook on the global economy, to be driven by growing COVID-19 vaccine administration with the downside risk being the surge in cases related to the delta variant of the disease.

Commodities

On the back improved global economic activities, the commodities market was met with strong demand in July. The CRB index which tracks global commodities performance recorded a 2.2% m/m increase in July (June: 2.6% m/m). The Gold indicator, in line with our expectation rebounded by 3.0% m/m as inflation concerns restored buying interest. Similarly, WTI and Brent closed higher by 1.6% and 0.3% m/m to $73.7/bbl. and $76.3/bbl. respectively despite the agreement by the OPEC+ cartel to gradually ease the production cuts. Regardless of increasing COVID-19 cases arising from the delta variant, we expect the commodities market to sustain the buying momentum, albeit at a slower pace in August.

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