Weekly Market Update - 16 November 2015

Market Outlook

Equity Market Outlook

• Last week Bank Negara Malaysia (BNM) reported the 3Q15 GDP at +4.7% yoy which saw a deceleration in private consumption. We expect our local market to remain range bound and supported by the anticipated injection of the ValueCap funds by end November.
• Weak oil prices during the week and the imminent interest rate hike by Fed in the up-coming December Federal Open Market Committee (FOMC) meeting have resulted in weaker regional bourses. We expect market to remain weak until the FOMC meeting.
• We expect the US dollar to stay buoyant against the emerging currencies until the start of the rate hike by FOMC.
• Strategy: Remain focused on export oriented industries that will benefit from a strong US dollar and; the construction sector which will benefit from the on-going government spending.

Fixed Income Outlook 

• Last week, the Malaysian Government Securities (MGS) market fell due to increasing rate hike expectations by the Fed which was precipitated by the positive Non Farm payroll data. The deadly attacks in Paris and Beirut over the weekend also added to the demand for safe haven investments. Incoming weak Chinese economic data suggest more easing by the People’s Bank of China (PBoC) in the coming weeks and; Japan fell into a technical recession with a fall of 0.8% in 3Q GDP. There was broad based strength in dollar assets while emerging market assets fell.
• Over the week, MGS curve steepened with the 10 and 7-year benchmark rising by 21 and 16 bps respectively. We think the 10-year is closer to the cheaper end of its trading range and have turned constructive in this segment. In the coming week, we expect hawkish minutes from the FOMC whilst European Central Bank (ECB) and Reserve Bank of Australia (RBA) to be dovish in their respective statements.

Source: Lipper for Investment Management, as at 13 November 2015
 

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