• 3Q23 results season is in full throttle

• All is well on US policy outlook

• Ringgit to rebound, albeit gradually

• Foreign investors net buy exceeded RM1bn in November, this is expected to continue

All is well for now thanks to US’s CPI that moderated further to 3.2% in October, a sharp improvement compared to September’s of 3.7%, the lowest since July, thanks to the slowdown in energy prices. Recall in our recent report where we highlight our concern on the gradual slowdown in global oil prices despite the brewing conflict in the Middle East and the winter season in Northern Hemisphere. Courtesy of the weakness in global oil prices (for now), the US economy has a breathing space amid the full impact of aggressive increases in US interest rate that could show a full impact only in early 2024. This is a cause to celebrate nonetheless amid October’s CPI that are not too far against the US’s FOMC target of circa 2.0% which gives no silver bullet for the central bank to adjust the policy rate further. This could be a precursor for the end of US interest rate upcycle. On that score, the current US FFR that is expected to be kept steady until 3Q24. Having said that, we expect Ringgit position to reverse and rebound, albeit gradually, to reach our year-end target of RM4.55 per Dollar, if not lower. Ringgit has been quite resilient amid the currency that ended the week at RM4.6805 per Dollar, slightly better than the week before closing of RM4.7085 per Dollar, before touching the week’s best of RM4.6725 per Dollar (15th November). With the steady return of foreign investors into the equity market, which it netted a cool RM1.033bn month-to-date, we expect Ringgit to continue to shine.

That said, the return of foreign investors is expected to be steady and sustainable courtesy of narrowing interest rate differential against advanced economies (AEs), positive news flow amid PMX that secured RM63bn in proposed investment in US, undervalued Ringgit and bright economic prospects thanks Malaysia’s GDP that is expected to hit 5% in 2024. Cherry on the cake is the solid Dewan Rakyat majority enjoys by PMX of which the current government that is expected to last until early 2028. With flurry of economic activity courtesy of 12MP and Budget 2024 spending, the feel-good-factor is expected to be a boon for foreign investors and hence, their steady return well into 2024. This is expected to be tempered however by the full blown 3Q23 results season following announcement that will gain in traction from this week onwards. Though there could be some knee jerk reaction following the release of Malaysia’s 3Q23 GDP that grew at a sub-4% but we opine that investors will start to look at Malaysia’s 2024 growth potential. Political stability will indeed be the push factor amid Malaysia that suffered from a high political risk premium since 2018. It’s about time we recover that lost ground and shine in 2024.

Source: BIMB Securities Research - 20 Nov 2023