Local equities market listless as the 3Q2023 corporate results remained mixed - Manokaran

Weekly Market Analysis by Manokaran Mottain

Petronas and its petroleum arrangement contractors have posted 19 exploration discoveries and two (2) exploration-appraisal successes which could potentially contribute over 1.0 billion barrels of oil equivalent of new resources in 2023.

The majority of the new wells were located in the Sarawak basin in clusters within the Balingian and West Luconia geological provinces.

Separately, Malaysia’s Producer Price Index for October 2023 fell by 0.3% year-on-year primarily due to a decline in the manufacturing & the electricity and gas supply indices by 0.7% and 0.5% respectively.    

The KLCI just managed to inch higher to end the week at 1,456.38 points (+2.46 points or +0.17%).

Once again, the local equities market remains listless as the 3Q2023 corporate results remained mixed as only the banking sector as a whole showed a marked improvement in results.

In addition, Bank Negara disclosed that local banks remained well capitalized to support economic growth with the banking system’s excess capital buffer remained healthy at RM132.6 billion in October 2023 while the aggregate liquidity coverage and loan-to-fund ratios stood at 150.8% and 82.2% respectively.

Nevertheless, trading activities pickup significantly last week as the average daily trading value rose to RM2.79 billion per day from RM2.05 billion during the week.

The jump was mainly attributable to the half yearly index rebalancing for the FBM series of indices for institutional funds.
 

Going forward, I am expecting trading activity to normalize back to the RM2.10 billion per day levels and maintain my trading range for the KLCI in the immediate term to between 1,450 and 1,485 points in the absence of any major catalysts for the market.    

US Treasury yields fell sharply over the past week as the bond market players aggressively bought into bonds in anticipation that the US Federal Reserve will start to cut interest rates in the first half of 2024.

The latest Personal Consumption Expenditure Index for October 2023 was in-line with market expectations of 3.5% and was a notch lower than September 2023’s reading of 3.7% which leads the market to price in a 99.5% expectation that the US Federal Reserve will continue to hold the Federal Funds Rate at the 5.25% - 5.50% at its upcoming meeting on 12-13 December 2023.     

UST 10-year yields fell by 26 basis points to 4.21% last week caused the negative yield differential to narrow to 39 basis points against the local 10-year the MGS yield which rose by two (2) basis points to 3.82%.  

Although vastly narrowed, the existing negative yield differential between the 10-year MGS and UST remains substantial enough to keep the local MGS yields to remain range bound.   

The Ringgit clawed back some of its previous losses against most of the major currencies last week. The local currency gained ground against the US Dollar at RM4.6710 (-1.20sen), the Euro at RM5.0210 (-8.75sen) and the Singapore Dollar at RM3.4893 (-0.24sen).

However, it weakened slightly against the Pound Sterling at RM5.9012 (+2.41sen).  As no changes are expected for interest rates in the developed markets for the remaining weeks in 2023, I am keeping my USD-MYR trading range at RM4.62 – RM4.72 in the near term. - DagangNews.com