Net outflow resumes

• Foreign flows back to negative, impacting KLCI. Flows remained skewed towards local investors last week, as foreign flows reverted to trend. Foreign funds registered a net outflow of RM249m, reversing a one week respite of net inflow of RM192m in week 37. The KLCI dipped below 1,600, closing the week at 1,597 for a second straight weekly loss. As we head into the final week of 3Q19, cumulative foreign net outflow is at RM7.7bn versus outflow of RM8.8bn for 9M18.

• US Fed cuts rate as expected. Markets showed little reaction to the US rate cut last week as investors had widely anticipated the move. Moreover, the Fed’s statement accompanying the meeting offered no substantive language changes from its previous meeting. Fed Chairman Jerome Powell said the Fed expects the economy to remain strong and inflation to remain around its 2% target, and suggested another small cut or two could be warranted in the future.

• China economic data weighing on markets, PBOC trims LPR. Data showed a continued slowdown in key drivers of China’s economy, as growth in industrial output and retail sales in August missed expectations. Meanwhile, China’s industrial output saw its lowest monthly gain since 2002. On Friday, the People’s Bank of China (PBOC) trimmed the loan prime rate (LPR) – by 5 basis points to 4.2% – for the second month in a row. This appears to be a measured approach by the PBOC as economic activity could be heading for further pressure in the coming months.

• The KLCI continues trading range. The KLCI is caught in sideway trading range of 1,620-1,580 since mid-August. We expect the trend to continue as investors remained concerned on global/regional economy as bond prices continue their bullish run this year. The 10-year MGS yield has declined to 3.35% at the end of last week from 4.21% in December 2018.

Net outflow resumes

• Foreign flows back to negative, impacting KLCI. Flows remained skewed towards local investors last week, as foreign flows reverted to trend. Foreign funds registered a net outflow of RM249m, reversing a one week respite of net inflow of RM192m in week 37. The KLCI dipped below 1,600, closing the week at 1,597 for a second straight weekly loss. As we head into the final week of 3Q19, cumulative foreign net outflow is at RM7.7bn versus outflow of RM8.8bn for 9M18.

• US Fed cuts rate as expected. Markets showed little reaction to the US rate cut last week as investors had widely anticipated the move. Moreover, the Fed’s statement accompanying the meeting offered no substantive language changes from its previous meeting. Fed Chairman Jerome Powell said the Fed expects the economy to remain strong and inflation to remain around its 2% target, and suggested another small cut or two could be warranted in the future.

• China economic data weighing on markets, PBOC trims LPR. Data showed a continued slowdown in key drivers of China’s economy, as growth in industrial output and retail sales in August missed expectations. Meanwhile, China’s industrial output saw its lowest monthly gain since 2002. On Friday, the People’s Bank of China (PBOC) trimmed the loan prime rate (LPR) – by 5 basis points to 4.2% – for the second month in a row. This appears to be a measured approach by the PBOC as economic activity could be heading for further pressure in the coming months.

• The KLCI continues trading range. The KLCI is caught in sideway trading range of 1,620-1,580 since mid-August. We expect the trend to continue as investors remained concerned on global/regional economy as bond prices continue their bullish run this year. The 10-year MGS yield has declined to 3.35% at the end of last week from 4.21% in December 2018.

Source: BIMB Securities Research - 23 Sept 2019