• Friday’s strong close saw the KLCI registering gain for the week at 1,670.28, up 8 points, as we head for the final week of 2018.

• Net foreign outflow spiked to RM464.1m from RM314.3m previously, the highest outflow since early November 2018.

• Total net foreign outflow for the year is now at RM11.7bn, the highest annual figure since 2015.

• The backdrop for markets is still weak, but expect local funds’ buying of index-linked stocks as we close out a wretched year for equities.

KLCI rebounded on Friday’s strength

Net foreign outflow persisted for 5 straight days last week. The net selling was however absorbed mainly by local institutional funds which bought a total of RM367.7m, while retail investors acquired RM96.4m. As a result the KLCI bucked the overall global market downtrend, with key index-stocks such as Tenaga, Sime Plant, Maxis, IOI Corp posting substantial gains on Friday particularly.

The US markets suffered another week of selldown due primarily to weak China data, hike in US interest rates and standoff between the government and Democrats over funding for President Trump’s border wall. As expected, the Fed hiked rates by 0.25bps to a range between 2.25% -2.5% — the 4th rate increase this year.

Its the final week, expect index-linked ourperformance

The sustained foreign funds’ selling of Malaysian equities is still a concern, in our view, heading for its largest outflow since 2015 (net outflow: RM19.5bn). Currently, with Malaysia’s GDP and corporate earnings growth weakening, plus crude oil price slumping, it is difficult to find a genuine “buy Malaysia” story.

Brent oil price fell to about USD53 per barrel due to oversupply and the outlook of energy demand uncertainty. The US markets meanwhile are in a bear market, as investors become increasingly worry of a real global economic slowdown in 2019.

Source: BIMB Securities Research - 24 Dec 2018