Market Reports

• Trump may have shot himself in the foot as his bullying tactics failed to yield any results so far. Instead, his antics have riled the Chinese so much so that, US firms in China may be under some scrutinization going forward.
• Recently, Germany have had also condemned Trump’s tactics thus indicating his support is waning. With China unwilling to back down, we reckon global markets will continue to be volatile until investors are fed up with the whole process only then we can expect business as usual.

• Major markets closed mixed last week amid the continuing trade tension between the US and China. The DJI slumped 2.1% or 533 points to close the week below the 25,000 mark at 24,815.04.
• The local bourse reversed its recent weakness to end the week on a positive note due to some portfolio realignment especially from the foreign funds.
• The FBM KLCI gained 3.09% or 49.41 points to 1,650.76. Finally, foreign funds flow turned positive of RM48.81m to halt YTD net outflow to RM4.82bn. Performance amongst the FBMKLCI components saw 27 gainers to 3 losers.
• Top 3 performers include TNB (+11.8%), Pet Gas (+8.6%) and Digi (+6.0%) while the top 3 losers were PChem (-3.14%), HLB (-1.35%) and SIMEPLT (-1.06%).

An inverted yield curve means that short-term interest rates are higher than longer-term ones. The inverted yield curve is what happens when investors are bidding for longer-term bonds thus driving down their yields because they are pessimistic about the short-term prospects for the economy.

Many refer such occurrence as a sign of imminent recession. Though we believe a recession will not happen, Trump’s bulldozing tactics globally will certainly create some anomalies within the bond and equity markets.

• The local bourse continues to be hampered by the exodus of foreign funds which has topped RM5.3bn year to date. This was after the RM11.6bn outflow last year.
• As a result, foreign shareholding on the FBM KLCI components has had tumbled from around 17.4% to currently 15.5% which we believe is at one of its lowest level.
• Therefore, though foreign selling may persists, we reckon the pace may be slower going forward. We continue to advocate investors to buy on weakness especially on blue chips.

• Based on the US Treasury semi-annual foreign exchange report, Trump administration has not labelled China as currency manipulator, this is likely to ease some tensions on the on-going trade war between US and China. However, there are five new countries added onto the watch list and this includes Malaysia.
• Our currency MYR has been weakening due to host of factors such as outflow of foreign funds, cut in overnight policy rate (OPR) and highly correlated with Chinese RMB currency. We feel this is unlikely to have any major impact on our equity market.