THE current market rally could have been due to optimism over less political noise in the near term after the Prime Minister (PM) reached out to opposition leaders and given the continuity in policy from the previous administration.
For the rally to sustain, CGS-CIMB Research opined that investors will want to see evidence of a recovery in economic activities, higher vaccination rates in states facing higher new COVID-19 cases, and more states moving to Phase 3 to 5 of the National Recovery Plan (NRP).
For now nevertheless, the research house maintained its FBM KLCI target of 1,604 points with the view that investors could position into recovery stocks during the August-September period.
CGS-CIMB Research expects investors’ attention in September to be focused on:
• Economics: Market watchers will be tracking the release of Monetary Policy Committee (MPC) meeting on Sept 9 and tabling of the 12th Malaysia Plan on Sept 27. Investors will also be looking at potential changes to the government policy following the appointment of the new PM and cabinet in Malaysia. Also in focus will be the US Federal Reserve’s Federal Open Market Committee (FOMC) meetings on Sept 21-22.
• Corporates: Investors will be focusing on fund flows to detect if the recent net buying by foreign investors in Malaysia is sustainable. Also in focus will be the ongoing 2Q 2021 results season as well as plans to relax the current movement restrictions in the country and simplifying the standard operating procedures (SOPs). Investors will also be eyeing newsflow on the vaccine roll-out to states with low COVID-19 vaccination rates.
• Global: Investors will be monitoring how the Delta COVID-19 variant is affecting the number of new COVID-19 cases and the roll-out of COVID-19 vaccination and distribution programmes globally. Also in focus will be the Chinese Government’s regulatory crackdown on a range of Chinese companies.
• Politics: Investors will be closely watching political developments when the Parliament reconvenes on Sept 13. Issues in focus will be whether the vote of confidence for the PM and whether the PM will initiate a confidence-and-supply agreement (CSA) with opposition parties to ensure political stability.
Having moved beyond the recent political upheaval that saw the installation of a new Government in accordance with constitutional provisions, RHB Research expects markets to expect polity continuity and the rule of law to be upheld.
“With over 46% of the total population now fully vaccinated, Malaysia is on track to reach the 60% milestone by Sept 25,” opined head of research Alexander Chia.
“While we cannot rule out more twists in the COVID-19 tale, there are enough ingredients on the table to remain constructive on equities as we are only in the embryonic stages of a new growth cycle with RHB economists continuing to emphasise upside risks to 2022 GDP growth.”
The market’s focus will move toward the imminent announcement of the 12th Malaysian Plan (Sept 20) and the 2022 Budget (Oct 29) that could well be considered a pre-election budget by building upon the recent revisions to the 2021 Budget, according to RHB Research.
“Expect investor focus to centre on large caps and cyclicals to position for a recovery scenario, bolstered by interest from foreign portfolio funds rotating out of North Asia and debt markets,” projected the research house.
“With domestic institutional funds still net sellers year-to-date, further external inflows could see markets spike higher if locals are forced to play catch up.”
RHB Research’s “overweight” sectors include banks, NBFI (non-bank financial institution), oil & gas (O&G), utilities, healthcare, basic materials, gaming, technology and construction. – Sept 2, 2021
