The local blue-chip benchmark index began last week with gains spurred by buying interest in key heavyweight industrial products, construction and plantation stocks before remaining in consolidation mode for most of the week due to a continued absence of positive catalysts on the local front. Market sentiment was also dampened by escalating tensions between Russia and the West as well as AI giant Nvidia’s slower revenue growth forecast which fell below investors’ expectations.

Week-on-week, the FBM KLCI lost 2.66 points, or 0.17 percent to 1,589.78, as dips in YTL Corp (-21sen), YTL Power (-25sen), PPB Group (-58sen), IOI Corp (-12sen), KLK (-50sen) and Public Bank (-9sen) overshadowed gains on Petronas Chemicals (+36sen) and Sunway Berhad (+35sen). Average daily traded volume last week grew to 2.91 billion shares versus 2.87 billion shares the previous week, while average daily traded value fell to RM2.31 billion, against the RM2.43 billion average the previous week.

Market sentiment is expected to remain subdued ahead of the month-end as investors await the final leg of 3Q24 corporate results reporting season of Malaysian listed companies, the November meeting minutes of the US Federal Reserve, the second reading of the US 3Q GDP, the US core personal consumption expenditure and China’s industrial profits this week. So far, only about 40% of companies under our coverage have reported their earnings with 55% of them coming within, 13% above and 32% below forecasts. Meanwhile, the US economic data should have bearing on the Fed’s monetary policy decision on 18 December that will include a press conference and updated forecasts on key economic indicators such as GDP growth, unemployment rate, and inflation over the next few years.

Additionally, concerns about the worsening war between Ukraine and Russia, and the potential for it to broaden by involving other global military superpowers, will continue to simmer in the background with Russia started using advanced weaponry, including hypersonic missiles, after Ukraine fired Western missiles into the Russian territory. Apparently, Russia also has sent air defence missiles and other military technology to North Korea in return for the deployment of troops from the North to support the Kremlin’s war in Ukraine, according to South Korea, which has increased the tense situation in the Korean Peninsula.

Downside risks aside, a stronger than expected 3Q24 results reporting season and anticipation of a year-end window dressing next month could position investors to buy on weakness. This expectation is not misplaced as December enjoyed the best average gain of 3.57% with the index overwhelmingly rising in 30 of the past 34 years or 88.2% of the time. With Donald Trump’s presidency and geopolitical tensions affecting market sentiments domestic sectors like banks, construction, telcos, power and utilities could attract interest apart from oil and gas stocks that will benefit from a spike in crude oil prices during war periods. These sectors will continue to benefit from the government’s all time high budget of RM421bn in 2025, foreign direct investments and domestic direct investments in renewable energy and growth sectors identified under the long-term plans.

Source: TA Research - 25 Nov 2024