Anwar's USA Tour would yield positive outcome over the medium term - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

I am of the view that Prime Minister Datuk Seri Anwar Ibrahim’s recent visit to the United States last week will yield some positive outcome over the medium term.

He met with 15 Fortune 500 companies such as Airbnb, Amazon, Boeing, ConocoPhillips and Kimberly-Clark in an effort to attract new investment from these corporates.

In the first six (6) months of 2023, Malaysia received foreign direct investments totaling RM1.84 billion or US$395 million from US companies which also resulted in the creation of 1,558 jobs.

Meanwhile, the local stock market performed well in line with my earlier forecast given the lack of market catalysts over the past week.

The KLCI Index ended the week at 1,450.23 points which was within my expected range of between 1,430-1,475 points. I expect the market to remain within that range until the next major milestone which is Budget 2024 in the middle of October 2023.  

The decision of the US Federal Reserve to hold the Federal Funds Rate at 5.25% to 5.50% was within the market’s expectation but it unsettled the financial markets when the US Federal Reserve Chairman Jerome Powell hinted that interest rates can still be hiked by a further 25 basis points if inflation remains stubborn till their next meeting in November 2023.  

The latest comments pushed bond yields higher over the past week. The 10-year MGS bond yields continued to track the movements of the UST 10-year yields which rose to 4.47%.

I believe that the selling primarily came from foreign fund managers who subsequently moved their monies back overseas which caused the Ringgit to continue weakening slightly against the US Dollar over the past two weeks.

The market also seems to prove my earlier assumption correct as the negative yield differential of 46 points between the 10-year MGS and UST is around the absolute limit that foreign bond fund managers can accept for a 12-month period as the latest US Federal Reserve comments virtually confirms that any potential interest rate pivot will only come in 2H2024.

The Ringgit was relatively flattish against the major currencies over the past week. I am maintaining my view that RM4.70 remains the upper limit over the near term and the Ringgit can potentially claw back some of its losses.

As such, I am keeping my expected USD-MYR range of between RM4.65 – RM4.70 in the coming week.  - DagangNews.com

Manokaran Mottain is an economist with many years of experiences with a number of financial institutions and is now managing his own firm, Rising Success Consultancy Sdn Bhd and has been writing his economic analysis on a weekly basis in DagangNews.com since 2022.      

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