Page 84 - SC Annual Report 2018 (ENG)

Securities
Commission
Malaysia
ANNUAL
REPORT
2018

the US imposed tariffs on imported steel and aluminium In addition, financial conditions also tightened in
in March, following earlier tariffs on washing EMEs vis-à-vis that of AEs in 2018 due to the shift in
machines and solar panels imposed in January. global liquidity arising from the US monetary policy
Subsequently, tensions heightened as the US shifted normalisation and the consequent appreciation
its focus to China from the second quarter onwards, of the US dollar. Wider growth and interest rates
which resulted in a series of tariffs and counter- differentials between the US and other major
tariffs imposed by the two countries. This adversely economies also contributed to the strength in the US
affected investors’ sentiments (Chart 3), particularly dollar, especially in the middle of the year, leading
for EMEs which are more dependent on trade. to pressures on EMEs’ assets. EMEs’ sovereign bond

Chart 3
Trade war negatively affected investors’ sentiments, leading to a marked increase in price volatility

2
Average daily return on selected equity markets Selected major equity markets performances
during negative news days versus normal days
1
0.3 115
110
0.0
105
-0.3 100
%
-0.34
-0.6 95
-0.68 1 Jan 2018: 100 90
-0.9 -0.83 -0.76 -0.75
-0.86 -0.83 85
-1.2 80
S&P 500 Euro Stoxx 600 Nikkei 225 Shanghai Composite FBMKLCI MSCI World MSCI EM 75 Jul-18

70
Oct-18
Sep-18
Aug-18
Mar-18
Jan-18
Feb-18
S&P 500 Apr-18 May-18 Jun-18 Euro Stoxx 600 Nov-18 Dec-18
Negative trade news days Other days Nikkei 225 Shanghai Composite

Notes:
1 Negative trade news days: 1 March 2018 (US announced plans to impose steel and aluminium tariffs); 22-23 March 2018 (US announced US$60 billion tariffs
on imports from China pursuant to USTR Section 301 investigation, and triggered subsequent retaliation from China); 19 June 2018 (US announced additional
tariffs of US$200 billion on imports from China); 25 June 2018 (Harley-Davidson announced to shift production overseas to offset EU tariffs); 6 July 2018 (US
and China imposed tariffs on US$34 billion of each other’s imports); 10 July 2018 (US announced additional US$200 billion tariffs on China); 20 July 2018
(US threatened to impose tariffs on all imports from China); 23 August 2018 (US and China imposed tariffs on another US$16 billion of each other’s imports);
17 September 2018 (US finalised US$200 billion tariff list that is subject to 10% rate to be increased to 24% on 1 January 2019); 24 September 2018 (US
imposed tariffs on US$200 billion imports from China, and China retaliated with tariffs on US$60 billion of US imports); 6-7 December 2018 (Huawei CFO
arrested for alleged violation of US sanctions on Iran).
2 Key events affecting equity market performances, as depicted by the red vertical lines: 22-23 March 2018 (US announced US$60 billion tariffs on imports from
China pursuant to USTR Section 301 investigation, and triggered subsequent retaliation from China); 19 June 2018 (US announced additional tariffs of US$200
billion on imports from China); and 17 September 2018 (US finalised US$200 billion tariff list that is subject to 10% rate, to be increased to 24% on 1 January
2019).
Source: Bloomberg, SC’s calculations

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