• Markets fell for the 3rd straight week, with the KLCI down by 0.6% to 1,695.88 versus the previous week

• Key worries remained on rising US interest rate hike and lower crude oil price.

• Net outflow by foreign funds continued albeit smaller at RM52.3m during the week, compared to RM417.3m previously. For YTD 2018, net foreign outflow has now reached a staggering RM10.55bn.

• We anticipate markets to be affected by risk aversion as concerns on economic growth reversing, rise.

Week 47 – Market rout continues

The markets global sell-offs continued unabated last week with technology stocks leading the rout. Crude oil also saw a resumption in its decline, providing the markets with fresh concerns on economic growth. The KLCI fell back below 1,700 as foreign outflow resumes, albeit at a slower pace than the previous week. Index component Telekom fell as acting CEO resignation exacarbated the company’s current problems. The stock is likely to be deleted from the KLCI in the next review.

The Brent crude oil bloodbath resumed, and on Friday closed at the lowest level this year – falling below USD60 per barrel. Any negative news on crude oil is causing significant moves in the commodity as OPEC heads for its next output meeting on 6-7 December.

Week 48 – another week of outflow, possibly

It will be another crucial week from earnings perspective as corporates complete their earnings announcement by end November. Please refer table next page for the key updates.

The rhetoric on US-China trade war still continues and the impact may have now been seen on China economy as car sales and real estate data saw a significant slowdown for October. The US rate path towards normalisation is likely to continue with another hike next month. Further out, it is still too early if the aggressive rates hike will be off the table next year, as the Federal Reserves will likely focus on inflation/economic data rather than asset prices.

Corporate earnings 3Q18 – latest update

A total 15 KLCI companies have now released their earnings this month (refer table below). As mentioned last week, the largest downgrade was seen in plantation, namely KLK and IOI, both coming in below analysts’ estimates. An outlier was Petchem which recorded above estimate earnings. New earnings releases last week were seen from MAHB, MISC, Press Metal and Sime Darby – all were mixed performance.

The aggregate KLCI earnings expectations for 2019 saw a slight change – it is now at 6.8% from 6.9% the previous week (it was 8.2% yoy growth expected in August), whilst for the Hijrah Shariah, growth estimate is up marginally to 5.2% versus 5.1% in week 46. Please refer Table 4.

Source: BIMB Securities Research - 26 Nov 2018