• Foreign flows small positive, KLCI up significantly for the week. Finally after a net outflow of 6 straight weeks (since early November), foreign net flows turned positive for Malaysian equities, albeit a small inflow of RM73m. The KLCI rose above 1,600 level for the first time since 11 November and recorded an impressive 2.5% for the week closing at 1,610 points. There was a distinct recovery in large capitalisation stocks, including Pet Chem and IHH, during the week. As we head into the final week of 2019, cumulative foreign net outflow is at RM11.1bn almost unchanged from the same period in 2018.
   
• Global stocks remain risk-on, yields continue to rise.Global stocks continued their spectacular run for December, as US markets scaled new heights last week. Similarly, the MSCI EM Index has clocked almost 15% YTD. Bond yields remain elevated as recession fears abated for the moment, and steepening the yield curve – the US 10- year Treasury yield closed last Friday at one-month high of 1.91% versus 1.8% the previous week.
   
• Trade deal and economic data boost sentiment. US economic data showed that personal incomes jumped 0.5% in November, well above expectations, whilst personal spending rose a healthy 0.4%. November housing starts, released Wednesday, also rose more than expected. China stocks rose for the third straight week, as a partial trade deal between the US and China offered a temporary respite in trade tensions. European stocks rose after UK Prime Minister Boris Johnson’s emphatic general election victory – the FTSE 100 Index climbed 3.1% for the week.
   
• The KLCI is short-term constructive as we usher into new decade. Despite a risk-on global stocks environment for the past 3 months, the KLCI has been caught in sideway trading range of 1,615-1,550 since mid-August. The past couple of weeks however, has seen the KLCI recovered rather convincingly following a retest of its 2019 low in early December (previous 2019 low was 1,548 points in June). We retain our view for a KLCI year-end of 1,650 and expect the index to be as high as 1,700 at the end of 2020. We estimate KLCI companies’ aggregate earnings to grow by 6.6% yoy in 2020 versus a decline of 0.4% this year.

Source: BIMB Securities Research - 23 Dec 2019