BN remains the front-runner to win the GE15 majority seats, but it will be intense said Manokaran

KUALA LUMPUR 14 Nov - The Barisan Nasional coalition remains the front-runner to win the majority of the seats in 15th General Elections but it will be a close & intense fight, said a senior economists, Manokaran Mottain.

"I believe that it will require the co-operation from Gabungan Parti Sarawak to secure sufficient seats to form a stable federal government post GE15.  

"So far, the most active campaigner for BN is the caretaker Prime Minister Datuk Seri Ismail Sabri Yaakob who has been travelling and campaigning actively across the key battlefield states and parliamentary constituencies to support the BN candidates," he said in his weekly market analysis in DagangNews.com.

At the time of writing, Ismail Sabri is at in Sibu, Sarawak for an official trip before returning to Kuala Lumpur in the evening and is scheduled to meet up Khairy Jamaluddin who is campaigning for a Parliamentary seat in Sungai Buloh, tonight.

The local equities market rallied last week with the benchmark KLCI Index jumping 2.1% to 1,468.21 points (+29.93 points) following the stunning 3Q2022 GDP growth numbers are improving sentiment across the regional markets on expectations that inflationary pressures are starting to ease off after the US consumer price index for October 2022 came in at 7.7% y-o-y.

Overall trading volume and values continue to remain lackluster with the daily trading values still averaging below RM2.0 billion a day despite Friday’s spike in trading value of RM2.42 billion.

"Nevertheless, I am still maintain my expectations for the KLCI Index at 1,420 – 1,480 points in the coming week as last week’s movement was still within my expectations," said Manokaran.

Meanwhile, US bond yields fell markedly across the duration curve as aggressive bargain hunting activities brought the 10-year UST yields lower by a stunning 35 basis points over the past week to 3.81% from 4.16% and lowered the total yield gains over the past 11 weeks to just 78 basis points.

Similarly, the UST 2-year yields also slumped by 32 basis points to 4.33% from last Friday’s close of 4.65%. The yield curve inversion between the UST 2-year and 10-year notes heads into its 18th consecutive week. The yield spreads continues to widen for the third consecutive week to -52 basis points from -49 basis points in the week before. The long-term average of the yield spread for both UST is +0.92% or +92 basis points.   

Unsurprisingly, the local government bonds yields spiked once again last week with the yields for the 10-year MGS bonds rising by 12 basis points to 4.47% from 4.35% last Friday.

"As I had pointed out earlier, the MGS will continue to come under selling pressure as long as the yield spread between the UST and MGS remains tight as this will force foreign bond managers to seek out bonds in other countries will higher sovereign ratings with comparable bond yields," he said.

The latest movement widened both countries’ 10-year bonds to a more reasonable 66 basis points from 19 basis points last week. At the current spread, there is room for the MGS to remain range bound within +/-10 basis points in the near term.  

CURRENCY

The Ringgit rebounded strongly against the US Dollar last week as slowing inflationary expectations in the US triggered a massive portfolio rebalancing exercise by investors into equities markets across the world.

"As a result, the Ringgit came roaring back to close at RM4.6250 / USD1.00 (+12.1sen) at the end of the week. In light of the recent sanguine turn of sentiments, I am re-adjusting the trading band for the Ringgit to between RM4.57 to RM4.67," said Manokaran.

However, the Ringgit continue to weaken against most of the other major currencies during the week with the exception of the Singapore Dollar. It closed lower against the Japanese Yen at RM3.2980 / JPY100 (-6.5sen), the British Pound at RM5.4370 / GBP1.00 (-3.45sen) and the Euro at RM4.7511 / EUR1.00 (-2.4sen).

The local currency managed to claw back some of its losses against the Singapore Dollar at RM3.3564 / SGD1.00 (+2.63sen) last week. - DagangNews.com