• Malaysian stocks rebounded, lifted by positive sentiment in the final week of earnings season, closing at 1,650.76, up a hefty 52 points against the previous week.

• Overall, week 22 saw net foreign buying of RM48.7m as opposed to net sell for the past 9 weeks. Local retail was net sell at RM105.0m. In the previous week, the corresponding figures were at -RM328.6m and RM52.9m respectively.

• As investors reassess Malaysian equities, we may see another positive net foreign inflow this week, aided by renewed interests on selected large caps.

Foreign funds returned

Foreign buying was apparent during the last 2 days of the week, averaging RM217m/day – reversing the net outflow at the beginning of Week 22. News that HSBC and UBS upgraded Malaysian stocks played a part in the KLCI recovery and foreign inflows. The KLCI ended up a substantial 3% for the week and marking the highest closing since end-March. One particular bright spot was the release of TM’s first quarter earnings which exceeded market’s expectation. The above-market results saw TM share price jumped by 33% ending at RM3.61 for the week. The KLCI had risen earlier during the week on optimism brought by Tenaga’s earnings and management briefing, that resulted in the stock rising substantially to RM12.32, its highest level in a month.

On the macro side, the US-China trade feud showed no signs of easing. As a result, global stocks struggled for most of the week. The conflict appeared to deepen as both countries upped rhetorics, with China planning to ban export of rare earths. The ringgit was traded lower at RM4.192 against the USD, whilst Brent crude oil saw further weakness, falling to USD66.87/b.

Earnings may have seen worst period behind

Corporate earnings for 1Q19 concluded last week. Most of the KLCI companies reported earnings that were in line with market’s expectations. The, KLCI’s 2019 aggregate earnings estimate is still sluggish at approximately 3% yoy. However there were bright spots in earnings of Tenaga and TM, which saw investors – and share prices – responding positively. The Malaysian market has been devoid of good news for a long time , hence last week market performance was a welcome relief.

Source: BIMB Securities Research - 3 Jun 2019