Stock market expected to continue trending higher with the announcement of the new Cabinet - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

THE local equities market staged a significant rebound last Thursday after the political stalemate at the parliament was resolved with the appointment of Datuk Seri Anwar Ibrahim (DSAI) as the 10th Prime Minister of Malaysia.

This came after almost five days of uncertainty following the conclusion of the 15th General Elections that resulted in a hung parliament for the first time in the country’s history.

The benchmark KLCI Index ended the week on a much stronger footing at 1,486.54 points (+37.22 points or +2.57%) as investors reduced their cash positions and piled back into the market as the political risk premium starts to evaporate.   

NOT ROSY

All is not rosy for the new government. The new unity government led by DSAI shows immense promise and provides DSAI an excellent platform to show his mettle.

Chief of the imminent challenges, the appointment of cabinet ministers and deputy ministers for the unity Government.

It is important for him to build a solid and capable cabinet that can work well together to face the multi-faceted challenges that the country is facing – especially cost of living and people’s decent income.

Meanwhile, DSAI is also planning to cut the number of Cabinet members as well Ministers’ salary and allowances, in the interest of rakyat wellbeing.

As a role model, YAB DSAI has kept his promise to work for free and avoid wastages like new car and office renovation.       

Going forward, more policies to be introduced to win back investor confidence and more new investment, especially from EU and US.

Already, the stock and currency markets have given DSAI a huge vote of confidence with a strong rally last week.

I expect the stock market to continue trending higher when the ministerial cabinet is filled next week as it dials down the political uncertainties for the country.

 

I expect the benchmark KLCI to re-test the 1,500-point level this week and next resistance at 1,520 points.

However, to surpass the 1,520 points level, the local equities market will also need to be supported by a strong set of corporate results for 3Q2022.

I also foresee the Ringgit to strengthen towards the RM4.35-4.40 level in the near term as investor sentiment improves as DSAI is regarded by investors to be business friendly.   

The euphoria of a new government also spilled into the local bond market as government bonds continue to claw back some losses last week on the back of continued bargain hunting activities.

Yields for the 10-year MGS bonds fell by 10 basis points to 4.10% from 4.26% last Friday. The latest result narrows the yield spreads between both countries’ 10-year bonds to 41 basis points, unchanged from last week.

My view of the MGS movement remains unchanged at +/- 20 basis points from 4.25% in the near term, due to narrow yield spread against the UST.  

CURRENCY

The Ringgit continued its rebound against the US Dollar for the third consecutive week as investors greeted the appointment of DSAI as Malaysia’s new prime minister positively. The Ringgit ended the week higher at RM4.4750 / USD1.00 (+7.5sen) at the end of the week.

In tandem, the local currency also strengthened against all of the other major currencies for the second consecutive week. It closed higher against the Singapore Dollar RM3.2541 / SGD1.00 (+5.5sen), the Japanese Yen at RM3.2100 / JPY100 (+2.7sen), the British Pound at RM5.4046 / GBP1.00 (+0.3sen) and the Euro at RM4.6514 / EUR1.00 (+4.5sen). – DagangNews.com