A further catalysts needed for KLCI to breakout of the 1,450 range - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

AS expected, Bank Negara Malaysia held the Overnight Policy Rate at 3.00% to continue supporting economic activities in the country as declining headline inflation lessened pressure to raise interest rates. 

Consequently, the equity market received a shot in the arm late with the announcement and managed to close the week on a higher note.

The benchmark KLCI Index rose by 8.03 points on a week-on-week basis to 1,449.93 points as foreign institutional funds turned net buyers in the second half of the week.

However, daily trading value remained around RM1.8 billion per day during the week indicating that the overall market still remained cautious despite the announcement.  

I am maintaining my trading range for the KLCI of between 1,430 and 1,450 points in the coming week as I believe further market catalysts will be needed to allow the market to breakout of the current trading range. Otherwise, it will continue to consolidate within my projected range.

US Treasury yields gave up virtually all of their gains over the past few weeks after the US Federal Reserve held the Federal Funds Rate at 5.25% - 5.50% for the second consecutive monetary policy meeting as more signs of both the economy and inflationary pressures slowing.

Non-farm payrolls for October 2023 came in lower than expected at 150,000 jobs from the consensus of 170,000 while the unemployment rate rose slightly to 3.9% from 3.8% expected by the street.  

UST 10-year yields plummeted by a staggering 30 basis points to 4.55% which also significantly narrowed the negative yield differential to 59 basis points against the local 10-year the MGS yield which fell by 15 basis points last week to 3.96%.  

Although the negative yield differential between the 10-year MGS and UST has narrowed, it remains relatively substantial and reflects an equivalent of 1-2 rate cuts.

The Ringgit experienced a relief rebound against the US Dollar last week upon news that the US Federal Reserve have stopped raising rates.

However, it held steady against most of the other major currencies last week.

The US Dollar ended at RM4.7260 (-5.0sen) but the Euro ended slightly higher at RM5.0670 (+1.07sen) while the Singapore Dollar ended almost unchanged at RM3.4876.

Foreign fund managers in both the bond and equity reversed their outflows over the past few weeks and turned net buyers in the local market.

I am maintaining my expected USD-MYR range of between RM4.70 – RM4.80 for the coming week as the Ringgit still remains within my projected trading band.  - 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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