• Stocks higher on change of leadership in the US. Shares represented by the KLCI rose almost 4% for the week and climbed to their highest level since mid-October as investors were encouraged by prospect of Democrat Joe Biden winning the US presidential elections. The general market fared better however, as banking stocks remained lacklustre ahead of the Budget 2021 tabled on Friday. Despite the weekly rise, the KLCI still trailed Asian stocks on a one-month basis
• President-elect talks policy changes. Unlike President Trump, the new US President-elect has campaigned for a more pragmatic approach on foreign and trade policies, with focus on globalization issues. However, there is widely held belief that the pressure on China is likely to be sustained as Mr Biden could possibly unite with allies to keep China in check. All in, the broader picture suggests a likelihood of a widening U.S. deficit (via another stimulus) and more “predictable” US foreign policy, which would result in a weaker USD. This will be supportive of EM and provides a risk-on scenario for Asian stocks especially, in the near-term.
• Budget is slightly positive, year for infrastructure as DE rises. The Budget 2021 was tabled last Friday (refer our reports) planned for improved allocation in DE by 38% yoy to RM69bn, making the infrastructure sector as a major beneficiary. The roll out ofseveral mega projects, including the Pan Borneo Highway, Gemas–JB Double Track, and also Klang Valley Double Track, are worth RM15bn. We also think the consumer sector is budget-positive as measures such as wider BPR and EPF withdrawal take affect due to continued emphasis on providing relief to incomes. We also like measures introduced for technology, ie total of RM1.5bn for R&D and innovation.
• Markets could see positive near-term implications. The stock market offers an accumulation opportunity as the KLCI trades around the 1,500 level, in our opinion. We retain our positive stance on the market, as we think foreign flows into EM especially Asia for cyclical sectors post-US election, may trickle to Malaysia selectively. We believe technology is a major winner on the back of varying themes – 5G connectivity among key one – which will benefit software and semiconductor growth. Manufacturing and basic materials could also appeal as the global recovery continues.

Source: BIMB Securities Research - 9 Nov 2020