• A short week amid public holiday and this could cap price discovery and hence, risk appetite

• An important week for US and Malaysia following key economic release

• Brent crude remains lethargic

Singapore and Malaysia equity market is closed for public holiday on Monday and this could be a precursor of a short week as some fund managers could be away for an extended period. This could stunt price discovery and hence, risk appetite especially during early of the week though the market could surprise on the upside on Tuesday thanks to DJIA strong close last Friday. That could change however amid US central bank that is due to release its October CPI numbers where this could either ‘make or break’ sentiment for the rest of the week. Note that this will be one of the key data that will be used by US FOMC to determine the path of FFR come December policy meeting, its final meeting of the year. This meeting is also key amid the US FOMC that could signal its policy strategy next year. It seems quite certain for now that US FOMC could have reached the peak of its interest rate upcycle thanks to US unemployment rate that slipped to 3.9% in October, very close to US’s Congressional Budget Office expectation of 4.1% by December. Given two more months to go, this looks very promising. US’s JOLTS has also moderated which touched 9.5mn in September, slightly lower compared to 9.6mn in August though close to double against the pre COVID-19 average (circa 5mn). In any case, consensus October CPI projection is rather disconcerting given their expectation of 4.1%, a rebound against 3.7% in September. This could douse sentiment as the US FOMC could reverse its decision and trigger another round of interest rate tightening come December or January meeting. However, the data is rather mix for now given the slowdown in US labour market though remaining hot for US inflation. US FOMC could abstain and keep the FFR steady given this. On this score, we reiterate our view that the US FOMC may kick start normalizing the FFR come 3Q24 as the full effect of US aggressive interest rate increases (note: >500bps since May 2022) could have shown convincing results.

This week is also an important week amid investors that will pay a very close attention to oil price movement. Using Brent crude as a benchmark, global oil price has been surprisingly lethargic even with the global conflict in the Middle East and the winter season in Northern Hemisphere. Any downside risk to oil price may hurt the FBMKLCI as that could hurt the government’s revenue, to some extent. This week is also important week amid BNM that will release Malaysia’s 3Q23 GDP. Street estimates project Malaysia’s 3Q23 GDP to touch 3.3% YoY, slightly better than 2Q23 of 2.9% but sharply lower against a year ago (3Q22: 14.2%). This could push YTD Malaysia average GDP to 3.9%, slightly lower against the official expectation of 4.0%-5.0% but close to our projection of 3.7%. Its quite a tall order for Malaysia 4Q23 GDP to surprise on the upside given 4Q22 GDP of 7.0% and hence, the pessimism on the GDP numbers in 2023.

Source: BIMB Securities Research - 13 Nov 2023