rakuten trade market reports : Page 35

Brace for some selling on the equity markets today following China’s retaliatory moves on its trade war with the US. Due to this, Wall Street succumbed to some heavy sell-down with the DJI Index shedding 623 points to below 26,000 again.
We believe the negative sentiments should overcast today’s trading and expect the region to trend lower today.
Locally, we see support level for the FBM KLCI at 1,580 and advocate investors to Buy on Weakness.

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Indonesia is the latest to reduce interest rates with a 25bps cut to 5.5% yesterday. Nonetheless, we do not expect Malaysia to jump into the bandwagon anytime soon.
Indonesia apart from the Philippines has been the more aggressive in hiking their interest rates last year in tandem with the Feds tightening stance from 4.25% to 6% while the Philippines from 3% to 4.75%.
As for Malaysia, Bank Negara only hiked its rates from 3% 3.25% during the same period hence the propensity to reduce rates is very much lesser.

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The domestic market remains stuck in a consolidation mode with the FBM KLCI oscillating between a tight range of 1,590-1,600. Due to the absence of positive catalysts, foreign fund outflows are still rampant touching almost RM2.1bn for the month of August alone.
Corporate earnings reported thus far failed to whet investors’ appetite as most came were within expectations at best. In view of this, we believe the upcoming Budget for 2020 this October would be crucial to spur sentiments amongst the investing community.
For today, we may see some bargain hunting as investors predominantly are seen to be sidelined until the completion of the corporate results season by end-August.

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Our recent stronger than expected GDP figures indicate our economic fundamentals remain resilient.
Coupled with Bank Negara Malaysia recent announcement of further liberalisation of the foreign exchange administration (FEA) policy and “positive engagements” with global index provider FTSE Russell, this should put our country on a stronger footing in the review by FTSE World Government Bond Index in September.
Hence, with our stronger economic fundamentals, we advocate investors to remain invested in the equity markets.

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It is interesting to note that the emerging Asian countries are currently offering highly attractive yields amid more stable political scenario and yet foreign investors are shunning the region.
Apart from Thailand which saw huge inflows of hot foreign money, the rest of South East Asia countries apart from Singapore offer solid 10-year bond yields ranging from 3.25% to 7.33%.
As most countries are jumping into the low interest rates bandwagon, we reckon it will be a matter of time before foreign monies return to the region which will have a positive impact on their respective currencies.

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