• The KLCI made some grounds on the first week of November as it closed at 1,713.87, rising by 1.8% versus the previous week ahead of Budget 2019.

• Week 44 saw a healthy net foreign inflow of RM322.7m versus an outfow of RM310.1m previously.

• For month of October net foreign outflow was sizeable at RM1.4bn compared to a small inflow of RM66.3m in September.

• We may see another positive net foreign inflow this week, as markets assess the optimism to resolve trade disputes between US-China, ahead of G20 summit later this month.

Week 44: Net inflow on the back of October sell off

Key highlight for the week is the return of foreign buying, albeit a small net inflow of RM322.7.m versus an outflow of RM310.1 in week 43. This resulted in a positive market performance – the KLCI recovering above 1,700 having fallen to its lowest since June/July 2018.

The October sell-off which saw the KLCI declined by 5%, was accompanied by a net foreign selling of RM1.4bn, the 4th highest monthly outflow YTD. Not surprisingly, the first days of November saw the KLCI rebounded quite significantly as investors re-look at value, with the US and China’s optimism on resolving trade dispute providing support ahead of the G20 this month.

Meanwhile, the ringgit regained its strength against the USD, closing at nearly 4.178 in tandem with regional currencies, despite a softer Brent crude oil price.

Week 45 – focus back on earnings, trades and rates

With the Budget 2019 uncertainty now behind us, we expect focus to turn on 3Q18 earnings as well as key external factors. Last Friday’s data shows the US jobs market remains incredibly strong and with wages starting to accelerate, domestic price pressures will increase. Consequently, the Fed is expected to hike rates by another 25bps in December and appears set to follow its dot plot for 2019 of 3 more hikes.

However, we still view the US-China trade war as the most important driver for the markets.

Source: BIMB Securities Research - 5 Nov 2018