• The KLCI weakened yet again closing at 1,641.81, down by 2 points versus the previous week.

• Overall, trade participation for Week 14 saw local institutions remaining net buyers, while foreign funds continued selling with net outflow of RM416.7m. Local retail segment turned to net selling of RM28.8m.

• Despite a firmer global equity market, the KLCI continued to underperform. The Malaysian market lacks positive catalysts, although certain sectors, i.e. construction showed some interest recently.

Selling in KLCI persisted

The KLCI’s performance during the week was negatively impacted by weakness in banking stocks. The FBM Financial Index fell as much as 1.4%, led by Public Bank, as loan growth remained lacklustre at 5% for February. The KLCI earlier in the week had fallen to its lowest level since mid-Dec 2018 with a total net foreign outflow of RM1.8bn for the year.

Certain sectors such as construction, which are not well represented in the KLCI did well (particulary Gamuda on ECRL hopes), whilst oil and gas stocks also fared well as Brent crude oil prices advanced by nearly 1% to US$69.20/b. Crude oil rise continued to be dominated by events related to supply concerns. The Ringgit fell slightly to RM4.084 against USD during the week. Chinese stock markets led the region’s rise, surging to a year’s high on optimism that US and China were in the final stages of hammering out a deal to end their trade dispute.

Global stocks look constructive on US bond yield recovery

Longer-term bond yields rose slightly during the week, with the UST10-year yield at 2.50%. The higher yield returned the yield curve to an upward slope over the three-months to 10-year range. Furthermore, US March jobs data confirms that the weak February print was but a speed bump. Nonetheless, the 3-month average pace of hiring has slowed from about 240,000 jobs per month in mid-2018 to 180,000 in 1Q19.

The Malaysia equity market outlook remained challenging for 1Q19 as earnings growth is weak and could be at risk of further downgrade. However, non KLCI stocks have generally outperform the KLCI YTD. This trend is likely to continue this year, in our opinion.

Source: BIMB Securities Research - 8 Apr 2019