WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN
THE local equities market ended the week on a more cautious note with the benchmark KLCI Index closing out the week at 1,449.32 points (-18.89 points or -1.29%) ahead of the 15th General Elections which is expected to be the most intensely fought general elections in the history of the country.
In addition, the majority of corporate results released for the third quarter of 2022 was also mostly within market expectations.
The cautious mood among investors is reflected in the overall trading volume and values which remains lackluster as the daily trading values still averaging below RM2.0 billion a day.
In the aftermath of the General Elections, I am adjusting my expectations for the KLCI Index to 1,420 – 1,450 points in the coming week as I expect the investing community to take a cautious stand until the new federal government is formed.
I am of the view that the investment and business conditions will return to normalcy if the new federal government formed has a solid majority of the parliament to provide stability over the next five years.
In addition, it will also need to implement business friendly policies and a good start would be to re-table the Budget 2023 with minimal changes to instill confidence to the business community.
Meanwhile, US bond yields rebounded last week on realization that the US Federal Reserve will not pivot so quickly on interest rates. The 10-year UST yields rose by just 2 basis points over the past week to 3.83% from 3.81%. This brings the total yield gains over the past 12 weeks to 80 basis points.
However, the UST 2-year yields sky rocketed by 32 basis points to 4.53% from last Friday’s close of 4.33% bringing the yield curve inversion between the UST 2-year and 10-year notes heads into its 19th consecutive week.
The yield spreads widened for the fourth consecutive week to -70 basis points from -52 basis points in the week before. The long-term average of the yield spread for both UST is +0.92% or +92 basis points.
The local government bonds narrowed back last week on bargain hunting activities with the yields for the 10-year MGS bonds dropping by 21 basis points to 4.26% from 4.47% last Friday.
The latest movement narrowed both countries’ 10-year bonds to 43 basis points from 66 basis points last week. As expected, the current yield spread is relatively reasonable but the MGS is expected to be range bound within +/-20 basis points in the near term.
The Ringgit continued its rebound against the US Dollar last week as investors continued with their portfolio rebalancing exercise from the US Dollar into other asset classes on expectations that the US Federal Reserve will consider slowing the pace of interest rate hikes at future Federal Open Market Committee meetings. As a result, the Ringgit closed markedly higher at RM4.5500 / USD1.00 (+7.2sen) at the end of the week. In light of the recent sanguine turn of sentiments, I am re-adjusting the trading band for the Ringgit to between RM4.50 to RM4.60.
The local currency also strengthened against all of the other major currencies during the week. It closed higher against the Singapore Dollar RM3.3098 / SGD1.00 (+3.8sen), the Japanese Yen at RM3.2370 / JPY100 (+6.1sen), the British Pound at RM5.4078 / GBP1.00 (+2.9sen) and the Euro at RM4.6970 / EUR1.00 (+5.4sen).
The recent 15th General Elections saw a hung parliament as no single party or coalition obtain an outright majority of 112 seats at the conclusion of the polling. Pakatan Harapan (PH) won 82 seats, followed by Perikatan Nasional (PN - 73 seats), Barisan Nasional (BN - 30 seats), Gabungan Parti Sarawak (GPS - 22 seats), Gabungan Rakyat Sabah (GRS - 6 seats), Warisan (3 seats) and other parties & individuals (4 seats).
To settle the post-election impasse, the Yang Di-Pertuan Agong has ordered all coalition and party leaders to notify Dewan Rakyat Speaker Tan Sri Azhar Azizan Harun of their support from the various parties to form the new federal government as well as their candidate for the Prime Minister by 2pm on Monday 21 November 2022.
PN currently holds the advantage in forming a government ahead of PH as GPS has released a press statement that it will be establishing a coalition together with PN, BN and GRS to form the next Federal Government.
The polling for two parliamentary seats will be postponed to a later date namely the Padang Serai constituency due to the unfortunate passing of Pakatan Harapan’s incumbent candidate M. Karupaiya during the campaigning period and the Baram constituency due to flooding on polling day.
There were some major upsets involving high profile candidates especially Nurul Izzah Anwar at the Permatang Pauh constituency, Datuk Seri Zuraida Kamaruddin at the Ampang constituency, Khairy Jamaluddin at the Sungai Buloh constituency and Tengku Datuk Seri Zafrul Tengku Abdul Aziz at the Kuala Selangor constituency.
It was also a disastrous election result for Parti Pejuang Tanah Air as their both stalwarts - Tun Dr Mahathir Mohammad and his son Datuk Seri Mukhriz Mahathir lost their respective parliamentary seats in Langkawi and Jerlun in Kedah to Perikatan Nasional’s Mohd Suhaimi Abdullah and Abdul Ghani Ahmad. The party also did not win any parliamentary states in GE15. - DagangNews.com