• The FBMKLCI ended the week in negative territory, closing at 1,629.97 points, down 30.12 points (-1.81%) from the prior week. This decline reflects the negative sentiment in the U.S. and global markets, driven by escalating geopolitical conflicts in the Middle East and ongoing global economic challenges, which continue to weigh on investor confidence and market sentiment.

• For the week ending Oct 4, foreign investors continue to be a net seller of RM1,098mn, firming their position from the previous week’s net selling of RM527mn.

• This week sector rotation is anticipated to continue focusing on the Financials and Energy sectors, with subsequent shifts towards the Plantation, REIT, Construction, Consumer, and Technology sectors; based on analyses of relative strength and momentum.

• We maintain our year-end target for the FBMKLCI at 1,720 points. However, we remain cautious on the market this week, as rising global volatility may prompt more conservative trading, reflecting the broader global shift toward safer assets. Additionally, uncertainties surrounding the U.S. Presidential election outcomes, ongoing geopolitical conflicts in the Middle East and Eastern Europe, and evolving global economic conditions will continue to exert pressure on market sentiment.

FBMKLCI Down 1.81% WoW

The FBMKLCI continued its downward trend, closing at 1,629.97 points, down 30.12 points (-1.81%) WoW, reflecting ongoing market volatility and profit-taking activities as investors shifted towards safer assets amid global uncertainties. The benchmark index was notably impacted by significant selling pressure in the Construction sector, which was the worst-performing sector during Week 40. Market sentiment turned cautious in the near term, with the selling pressure likely a knee-jerk reaction to the latest developments in the Middle East. In contrast, the Energy sector outperformed, emerging as the best-performing sector of the week, buoyed by the escalation of tensions in the Middle East, which elevated crude oil prices (refer to Table 5).

We expect Bursa Malaysia to remain in cautious trading mode this week, with an upside bias, as overall market sentiment stays positive. However, the market is likely to remain in consolidation mode until fresh catalysts emerge, reflecting global and regional performance. Rising global volatility may prompt more conservative trading, as investors increasingly shift toward safer assets amid escalating geopolitical conflicts in the Middle East i.e., between Israel and Iran. Additionally, uncertainties surrounding the U.S. Presidential election outcomes, ongoing geopolitical tensions in both the Middle East and Eastern Europe, and evolving global economic conditions are expected to continue weighing on market sentiment.

Selling Pressure in Malaysian Market

Escalating tensions in the Middle East triggered a broad sell-off in the Malaysian stock market, dampening hopes for a rebound in Malaysian equities following last week's rallies in Chinese markets driven by China's unexpected stimulus measures. Despite this, ongoing market volatility has continued to sustain daily trading volume and value. For Week 40, the average daily traded volume increased to 3.37bn (+1.5% WoW), although the average daily traded value decreased to RM2.71bn, down from RM3.02bn in Week 39. This decline was primarily driven by profit-taking activities and selling pressure in Malaysian equities, particularly from foreign funds. However, local institutional inflows and retail liquidity helped cushion the overall impact.

Almost all sector indices on Bursa Malaysia posted WoW negative performances, except for the Energy sector, which was the best performer with a +4.2% WoW gain, followed by REIT with a +0.6% WoW increase. On the downside, the Construction (-3.5% WoW),

Foreign Investors Remain Net Sellers During Week 40

Foreign investors maintained their net selling position during Week 40 (30 Sept – 4 Oct), with total outflows amounting to -RM1,098mn. This marks the second consecutive week of foreign selling, following six straight weeks of net buying since Week 33 (12–16 August), underscoring the continued selling momentum amid heightened market caution driven by global uncertainties. During this period, the sectors with the largest net buying by foreign investors were Plantation (RM27.5mn), Property (RM20.9mn), and Energy (RM10.0mn). These gains were partially offset by net selling in the Financial Services (-RM553.3mn), Utilities (-RM159.5mn), and Consumer (-RM132.3mn) sectors. The top net buys by foreign investors were Capital A, Leong Hup International, and IOI Corporation, while the top net sells were CIMB, Maybank, and SIME.

Our View

We expect Bursa Malaysia to remain in cautious trading mode this week, with an upside bias until fresh catalysts emerge, in line with global and regional performance. Despite the prevailing caution, we believe the FBMKLCI's current valuation offers attractive buying opportunities and strategic positioning for the year ahead. Rising global volatility may lead to more conservative trading as investors increasingly shift toward safer assets amid escalating geopolitical conflicts in the Middle East. Additionally, uncertainties surrounding the U.S. Presidential election outcomes, ongoing geopolitical tensions in both the Middle East and Eastern Europe, and evolving global economic conditions are likely to continue weighing on market sentiment. Key events to monitor include the U.S. CPI and Malaysia’s Labor Market data release on 10 October, as well as Malaysia’s Manufacturing Sales, Industrial Production Index (IPI), and Retail Sales data release on 11 October.

Sector rotation this week is expected to continue focusing on the Financials and Energy sectors, with subsequent shifts towards the Plantation, REIT, Construction, Consumer, and Technology sectors; based on analyses of relative strength and momentum

Source: BIMB Securities Research - 7 Oct 2024