It was another disappointing week for ASEAN bourse no thanks to uncertainty over US policy direction which could see another 1 or 2 rounds of tightening measures in the near term. The sizzling hot US September labour market could be enough of a reason for US FOMC to remain hawkish. The resilient US September unemployment rate that stayed unchanged against August numbers of 3.8% could douse any optimism or hope that the US central bank could delay any policy tightening measure. Note that the current US’s 3.8% unemployment rate is out of range against US FOMC year-end target of 4.5% and we have only 3 months before the year draw to a close. More importantly, there is no guarantee that US unemployment could drop sharply in a short time space given the hot US job openings which could fan steady wage growth and hence, the inflationary pressure in the country. To put things into perspective, US’s August JOLTS remained solid after it surged by 8.8% on MoM basis to reach 9.8mn. This is close to 100% higher against the prepandemic average of 5mn (2009-2019). With the on-going dynamics and looking from the lens of investors, we are not surprised to see the USD has been moving from strength-to-strength.
With downside risk remains for the Ringgit, we are also not surprised to see investors lack of conviction on Consumers Sector (KLCON) which pushed the index to be the worst loser YTD. On the flip side however, sentiment should reverse once US inflation drops steadily and convincingly. We see lack of visibility over that for now given the strong US labour market and its CPI that remained off the mark compared to US FOMC target (2%++; August CPI: +3.7%). On that score, US September CPI numbers that are due for release on 12th October (Thursday) will be an event to watch out for. Market may also be dampened by the uncertainty over Malaysia’s Fiscal Budget 2024 that will be announced next Friday. Will the government take the leap to re-introduce consumption tax? If so, by when? Will subsidy be removed completely across all products (e.g., rice, cooking gas, cooking oil, electricity, petrol)? Will there be income tax cut for the vulnerable groups (B40, M40)? If there is a re-floatation of petrol price, how will this be implemented across all vehicles (cars: >10mn; motorcycles: >10mn)? What would be the impact to inflation given the massive policy change by the government? What’s the impact of capital gain tax and will it hit the equity market? All these uncertainties may sap the energy and investors risk appetite leading to next Friday. Suffice to say that there is a low chance of budget rally unlike the previous years. The current dynamics may also not be favourable for the Ringgit amid the currency that could test the 1-year low of RM4.7477 per Dollar.
Source: BIMB Securities Research - 9 Oct 2023
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 09, 2024
Created by kltrader | Aug 09, 2024