• Stocks recovered. Malaysian stock market rebounded off a multi-year lows as China reduced trade tariff, while fears of China-driven coronavirus subsided slightly. The KLCI rose to 1,554 points (versus 1,531 points the previous week, the lowest level since Aug 2015). Foreign selling almost halved to RM329m versus RM660m the previous week. The YTD 2020 net outflow stood at RM604m versus RM1.2bn in Dec 2019. The KLCI meanwhile is down 2.2% for 2020 but not in isolation as several regional markets have also fallen this year.

• China tariff cut providing market impetus. Investors were encouraged by China’s announcement that it was cutting tariffs on some US imports, effective February 14, as part of the “phase one” trade deal. It announced on Thursday that it would lower import tariffs by 50% on USD75bn of US imports. China market reopened on Monday and saw the Shanghai Composite Index declined by 7.7%, but later stabilised and saw a fall of just above 3%. US stocks achieved record high on Thursday. The 10-yr Treasury yields rebounded to 1.6% from 1.52% the previous week, indicating moderation of the coronavirus fears, thus reducing demand for perceived safe haven bonds.

• Wuhan virus has seen more cases than SARS. The SARS virus infected approximately 8,000 people between November 2002 and July 2003 and saw 772 deaths, according to WHO. The death toll for the Wuhan virus has surpassed 800 people while the number of people infected are reportedly 3 times more than SARS. However, the mortality rate for SARS was roughly 9% while the Wuhan coronavirus kills only around 2% of those infected, hence less deadly.

• Malaysian stocks rose across the board but impact of virus still being assessed. The KLCI showed resilience last week but this is line with recovery in global stocks as fears from the Wuhan virus moderated and US stocks hit record high. Obviously, markets will continue to grapple with the uncertainty of the impact from the Wuhan virus, now in its second month, especially with death toll continued to rise. Key event this week will be the GDP announcement for 4Q19 on Wednesday and the narrative that accompanies the economic data. Corporate earnings announcement for the final quarter will accelerate in third week of February.

Source: BIMB Securities Research - 10 Feb 2020