No major catalysts, KLCI’s trading activity expected to remain lackluster - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

THE Progressive Wage Policy was tabled at the Parliament by Minister of Economy Rafizi Ramli. The policy is expected to cost the federal government around RM2 billion and would potentially benefit up to 1 million workers and generate RM3.3 billion in gross domestic product.

The policy will initially be opened to small medium enterprises on a voluntary basis and each company will be given between RM200 – RM300 per employee per month for those employees earning between the minimum wage up to RM4,999 per month.

I believe it is a good initiative to overcome wage stagnation issues and improvements to the policy can be made along the way as the results of the pilot run filters back.

The federal government is expected to launch the National Technical and Vocational Education Training (TVET) policy in June 2024.

And in my opinion the proposed 30% class room learning and 70% lab work & hands-on training format as well as the Memorandum of Co-operation between the government and government-linked and private companies to hire as many of the TVET graduates as possible is an excellent move.  

KLCI

The KLCI was on its back foot throughout the week and closed out at 1,441.97 points (-14.41 points or -1.0%).

The local equities market was dragged lower by a relatively uninspiring 3Q2023 corporate results amid rising concerns that the 4Q2023 may also turn out to be another mixed bag of results.  

As expected, trading activities on the market also slowed to RM1.93 billion per day last week in the absence of portfolio rebalancing exercises from RM2.79 billion per day in the previous week.

Going forward, I am expecting trading activity to remain lackluster in the coming week as there are no major catalysts insight. Window dressing activities are likely to commence towards the end of the year.

Given the fact that the KLCI has fallen below the 1,450-point support level, the immediate trading range reverts to 1,435 points and 1,450 points for the coming week.     

US Treasury yields ended the week on a flattish note after the non-farm payrolls for November 2023 came in much better than expected at 199,000 jobs against a consensus of 190,000 jobs.

It was also much better than October 2023’s number of 150,000 jobs.  The latest report more or less hints that the US Federal Reserve will continue to hold the Federal Funds Rate at the 5.25% - 5.50% at its upcoming meeting next week on 12-13 December 2023.     

UST 10-year yields rose slightly by two (2) basis points to 4.23% last week caused the negative yield differential to widen back to 50 basis points against the local 10-year the MGS yield which fell by nine (9) basis points to 3.73%.  

The existing negative 50 basis points yield differential between the 10-year MGS and UST is likely to keep the local MGS yields to range bound unless the US Federal Reserve starts to cut rates at a faster than expected pace next year.   

The Ringgit managed to gain ground against some currencies but remained relatively unchanged against the US Dollar at RM4.6720 and Singapore Dollar at RM3.4900.

The local currency gained ground against the Euro at RM4.9541 (-6.69sen) and the Pound Sterling at RM5.8824 (-1.88sen).  

I expect the currency markets to consolidate around the current levels over the next three weeks as no major developments are expected over the coming festive periods.

Against this backdrop, I am maintaining my USD-MYR trading range at RM4.62 – RM4.72 till the end of 2023. - 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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