WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN
PRIME Minister Datuk Seri Anwar Ibrahim said Malaysia managed to secure RM63.02 billion in proposed investments from the US following its meetings with various technology companies at the Asia-Pacific Economic Co-operation (APEC) meeting and the trade & investment mission to the US before that.
Among the latest companies who agreed to invest in Malaysia were TikTok, Microsoft, Google, Enovix and TPG.
The key now would be how fast Malaysia can process, approve and materialize these proposed investments.
Malaysia’s GDP grew by 3.3% in the third quarter of 2023 supported by continued expansion in household spending, recovery in in-bound tourism and higher construction activity.
The labour market also improved as the unemployment rate inched lower to 3.4% from 3.5% in 2Q2023 with a 1.4% increase in real wages.
The average inflation of the food and non-alcoholic beverages also fell to 4.1% in 3Q2023 from 5.6% in 2Q2023.
Bank Negara Malaysia expects the full year economic growth for 2023 to come in at around 4.0% which is in-line with market expectations. For 2024, BNM expects growth to accelerate to between 4.0% - 5.0%.
The KLCI finally made a convincing breakthrough the 1,450-point resistance level to end the week +15.49 points (+1.07%) higher at 1,460.67 points on the back of expectations that the interest rate upcycle in the US and EU has finally ended.
However, the sky isn’t all clear for the local equity market yet as the average daily trading value only averaged around RM1.98 billion during the week.
This means that follow through buying support is still weak even-though there has been a breakthrough. As such I am adjusting my trading range for the KLCI in the immediate term to between 1,450 and 1,485 points as the performance of the market will largely be dependent on the 3Q2023 corporate earnings releases over the next two weeks.
US Treasury yields fell to their lowest level in two months as bond investors and traders bet that the US Federal Reserve’s interest rate upcycle has ended.
The US Consumer Price Index and Producer Price Index for October 2023 both came in below expectations. Moreover, the Core Consumer Price Index (which excludes food and energy) fell to a two-year low of 4% on an annual basis.
UST 10-year yields dropped 20 basis points to 4.44% last week and significantly narrowed the negative yield differential to 60 basis points against the local 10-year the MGS yield which also continued to retreat for a third week in a row by a further two basis points to 3.84%.
Although narrowed significantly, the existing negative yield differential between the 10-year MGS and UST is still substantial which leads me to conclude that the local MGS to remain range bound for the time being.
The Ringgit’s performance was mixed last week. The local currency extended its rebound for a third consecutive week against the US Dollar at RM4.6780 (-2.85sen) and the Euro at RM5.0036 (-1.76sen).
However, it ended weaker against the Pound Sterling at RM5.8290 (+7.4sen) and the Singapore Dollar at RM3.4660 (+0.61sen).
Foreign fund managers in both the bond and equity markets continued to be net buyers in the local market in anticipation of a major fund flow reversal from the US and EU markets.
Given the rising likelihood that the interest rate upcycle in the US and EU is coming closer to an end, I am lowering the expected USD-MYR trading range to between RM4.62 – RM4.72 for the coming week. - DagangNews.com