• Equities ended the week lower as the KLCI fell 10 points to 1,672.13 versus the previous week despite a slight improvement in net foreign inflow to RM172m.

• For 1H19, the KLCI fell 1.2% compared to the end of 2018 as foreign funds sold heavily with a net outflow of RM4.7bn

• On monthly basis, foreign inflow turned positive in June, albeit a small buying amount of RM134.6m, as opposed to a substantial outflow of RM2bn in May.

• For the second half of 2019, US-China trade focus will continue, with the impending US interest rates cut running parallel in the background. Our year-end KLCI target of 1,750 remains.

Foreign funds returned

The KLCI fell slightly despite a slight improvement in net foreign inflow during the week, shaving 10 points off the index to 1,672. The market saw some volatility as investors react to news from the G20 summit and remarks with regards to US-China trade deals. Despite the decline, the KLCI’s outlook remains constructive as key index stocks appears to be on uptrend again following a pause the past 1-2 weeks. The week also saw Gamuda releasing results which beat estimates, helping push its share price to near 1-year high.

The ringgit ended higher at RM4.13 against the US dollar on hopes of a positive outcome of US-China trade talks as both presidents meet at the G20 summit.

Brent crude oil price was up 2.6% at USD66.55/b on political tensions between Iran and US. On the macro front, Malaysia’s inflation remained benign at 0.2% yoy in Mayunchanged from the previous two months.

Trade war escalation averted

The US has agreed to restart trade talks and would not be adding tariff on USD300bn of Chinese imports for the “time being” as China agreed to buy larger amounts of agricultural products particularly soybean, from the US. In addition, President Trump also said that US companies would be allowed to continue to sell its equipment Huawei.

Global equities have seen renewed vigour in June as investors factor in a possible US interest rates cuts. This shift in monetary policy have helped buoyed markets. A period of calm for US-China trade war will likely add to stockmarkets optimism in 2H19.

Source: BIMB Securities Research - 1 Jul 2019