Weekly Market Update - 25 May 2015

Market Outlook

Equity Market Outlook

Regional

• Regional markets were range-bound for the week of 18 May, awaiting more economic data before trending higher.
• Federal Reserve (FED) Chairman, Janet Yellen on 22 May re-affirmed that FED is on track to raise rates in 2015 however the path to normalisation is likely to be a long one. Consensus expects the first rate hike to take place in September.

Malaysia

• It was tough week for Malaysia and the FBM-KLCI was sold down below the 1,800 points psychological support despite the long-awaited tabling of the 11th Malaysia Plan (11MP) on 21 May. As expected, the 11MP was a relative non-event as Malaysia's long term economic outlook has been already charted largely by the Economic Transformation Programme.
• The negative news on 1Malaysia Development Berhad (1MDB) continued to take centre-stage which sparked a sell-off of Tenaga Nasional Berhad’s (TNB) shares by foreign investors after a news-wire reported that TNB may be forced to bail out 1MDB by buying over its power assets.
• Our Funds have been locking in profits in the past 2 weeks as we expect the index to retrace further after breaking the 1,774 level which was the previous low in March. We will take this opportunity to accumulate selectively. Our cash levels in all our Funds are at comfortable levels. We are maintaining our current investment strategy.

Fixed Income Outlook

• The Malaysian Government Securities (MGS) market was relatively quiet last week as investors preferred to stay on the sideline due to a lack of conviction. However, there was demand on the short end of the curve by foreign investors as the carry trade looks particularly attractive at the moment. Overall, the curve tightened on both the short and long end by 2-4 basis points.
• In the primary market, the 20-year benchmark auction saw strong interests, with a bid-to-cover ratio of 2.7x and an average yield of 4.25%.
• Inflation for April rose by 1.8%, slightly below expectations. Prices for food and beverage rose, but were offset by lower transportation costs.

Source: Lipper for Investment Management, as at 22 May 2015

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