Weekly Market Update - 5 December 2016

Market Outlook

Equity Market Outlook

• Recent Foreign Exchange management measures by Bank Negara Malaysia may relieve some pressure on the RM, but we expect the RM to remain weak due to rising expectations of interest rate hike in the US and foreign outflows in the local bond market.
• We remain positive on the Malaysia market.

o   Foreign shareholding is low and cumulative foreign inflows is near Great Financial Crisis level

o   Inflows should resume should risk sentiment improves as the US economy improves

• The funds are positioned in some export stocks, large cap stocks that have been sold down and sectors that may benefit from government pump-priming such as consumer and construction sectors.

Fixed Income Outlook

• The decision by Organization of Petroleum Exporting Countries (OPEC) to cut output for the first time in 12 years triggered a rally in the oil price. The relief rally by oil triggered better trading sentiment across asset classes. Last week, the Malaysian Government Securities (MGS) market recovered mildly after a period of strong selling. Yields declined by about 2-18bps with the 5-year benchmark posting the strongest recovery.
• In the coming week, we will have to assess how the Italian referendum will affect the European markets. Even though we do not think the results will directly impact the local bond market, we will need lookout for spillover effects if any.

Source: Lipper for Investment Management, as at 2 December 2016. Past performance is not necessarily indicative of future performance. 

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