• A quiet week for Malaysia on economic release – investors to focus on up-coming budget tabling.

• Malaysia’s 2023 budget tabling is less than 2 weeks from now.

• Upside potential will be capped however by a challenging external environment amid a rising geopolitical tension

• Sentiment may be dampened by US FOMC next move – another super-size increase in FFR may bite

It was a jittery week for the global equity market amid the US FOMC policy decision that could surprise on the downside. The day of reckoning finally arrived after the US central bank decided to unleash its 3rd super-sized increase in US benchmark interest rate on Thursday, the Federal Funds rate (FFR), by 75 basis points, its successive large increasessince the last 3 meetings. The global equity market bleed as a result while regional currency tanked. FBMKLCI was not spared as it lost over 42 points to end the week at 1,424.98 – with the execption of Indonesia’s JCI and Thailand’s SET however which was surprisingly resilient. MSCI ex-Japan index, the regional main bellwether, also slipped, after it gave up 50 basis to end the week at 1,230.30-points. Ringgit was also hammered after it closed at RM4.55 per Dollar, 0.12% lower week-on-week (WoW) though it strengthened against regional currency including Singapore Dollar (+01%), Indonesia Rupiah (+0.2%) and Philippines Peso (+0.3%). It lost against the Thailand’s Baht (-0.2%) however. The Dollar Index gained further traction, not surprisngly, up by 0.1%, 0.5% and 10.2% on W-o-W, month-on-month (MoM) and year-on-year (YoY). Apart from US policy decision, sentiment was also hurt by Russia’s latest tactical decision to draft 300k more army to fight in Ukraine, suggesting a longer and prolong disruption from Russia-Ukraine conflict which may spill into 2023 and hence, the global downside risks. All in, FBMKLCI shed a total of 42.33 points WoW to finish at 1,424.98 for week 38th, a deterioration against week 37 following the index that lost 29.22 points then.

Foreign investors interest in Bursa Malaysia also wobbled for the week (week 38; 19-23 September) following a net selldown of RM562.6.5mn, over 200% higher against the week before (week 37: -RM186.2mn). Positively, foreign investors accumulated a total of RM7.3bn in Bursa Malaysia YTD, thumping local institutonal investors that sold RM9.6bn for the same time – foreign investors’ best form since 2017 (RM11.1bn). That said, foreign investors sentiment could recover amid the parliment that could be dissolved following the tabling of Budget 2023 on 7th of October (Friday). Note that the sitting government has a very short window to dissolve the parliment following the expected La-Nina condition this year which may bring more rain fall than usual and therefore, the flood condition in flood prone area (east coast). The meteriological department projected this to take place from late November until February next year. March, in the meantime, is the start of acedemic year for schooling children while April is a ‘no go’ too due to fasting month and the Hari Raya celebration that could last until the end of April. Therefore, the government may seek Yang Di Pertuan Agong’s consent to dissolve the parliment soon or this could be pushed to May or June next year, suggesting the probability that the current government may serve its full 5-year term. The positive newsflow on parliment dissolution and Budget 2023 tabling may lift the investors battered sentiment and hence, the much awaited election and budget rally.

Source: BIMB Securities Research - 26 Sept 2022