2H19 Outlook will be Better for Malaysia?

Dubbed as one of the worst major global markets by Bloomberg, the benchmark FBM KLCI Index has year-to-date (YTD) slipped 1.10% (1H19) to 1,672.13 level, while the rest of global markets recovered and ventured deep into positive territory. 

Factors that topped the list for the less upbeat mood were:

• trade war and global recession fear, which resulted in heightened foreign exit;
• steep correction in crude oil price and ringgit weakness;
• unexciting valuation and corporate earnings growth versus comparable peers; and
• still muddy domestic politics as succession issue remain a key sore point along with many unwanted incidents consistently rocking the power base and the cohesiveness of the ruling coalition.

Outlook of 2H19 will be hinges on these few Hot Topics:

• Trade war between US and China (still...)
• Budget 2020 in October, in anticipation of higher expectation on ruling government to be business-friendly.
• Brexit. Oh no again? Although have cooled down, this will boil over again as the 31st October deadline approaches.
• Possible removal of Malaysia from the World Government Bond Index (WGBI) by FTSE Russell in September (which is unlikely)

In 2H2019, dovish central banks, China’s policy stimulus, resilient consumer demand and technological innovation are set to extend the global economic cycle further and support riskier assets, says HSBC.

According to Affin Hwang Capital research, recent earnings results show that companies in the rubber glove sector are not at significant risk of lower margins from rising production costs. The research house remain positive on the outlook for glove sector. 

Meanwhile, the consumer sector in Asia will stay resilient amid global uncertainty in the second half of the year (2H2019). The sector has been benefiting from rising wages and government incentives in the US and rising private wealth in Asia, says HSBC Private Banking.

Conclusion:

Lack of Strong enough Catalysts for Market Rerating to Higher Level.

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