We take an in-depth look at the market in November 2021.
Contents
Market Outlook
The ASEAN bourses recorded positive returns in October with Jakarta Composite Index (JCI), Singapore’s Straits Times Index (STI), FTSE Bursa Malaysia KLCI Index (FBMKLCI), Philippine’s Stock Exchange Index (PCOMP), and Thailand’s Stock Exchange Index (SET) rose by 4.84%, 3.61%, 1.59%, 1.46%, and 1.11% MoM respectively.
China’s official manufacturing purchasing managers’ index fell to 49.2 in October, the second month it was below the key 50-mark that signals a contraction in manufacturing activity. The supply chain continued to be pressured by a power crunch triggered by a shortage of coal and tougher emissions standards on the back of strong industrial demand. As winter looms, the prolonged situation could push up the input cost prices in which China’s producer index already hit a 26-year high in September, up by 10.7% YoY. Despite the global trend of countries to coexist with the virus, China is still adamant to uphold its Covid Zero strategy as more provinces are now batting with surging Delta outbreaks. The authority plans to lower fees and taxes for businesses, particularly in small and medium-sized enterprises while the central bank boosted the injection of short-term cash into the banking system amid growing concerns on liquidity tightness in the market.
Japan’s ruling coalition holds power in the recent parliamentary election will bring about a smooth passage for Prime Minister Fumio Kishida to pass a supplementary budget by the end of the year. In September, the deeper than expected drop in Japan’s industrial output of 5.4% MoM (-3.2% YoY) was mainly due to supply problems. A temporary drop in capacity was due to shortages of chips and other key devices coupled with weaker demand from China and from within Japan due to virus-related restrictions. The BOJ has also revised downward its 2021 GDP growth outlook of 3.4% from 3.8% in July estimates, while core inflation is forecasted at 0.0% from 0.6% previously.
During the tabling of Malaysia Budget 2022, Prosperity Tax (Cukai Makmur) was introduced as a one-off company income tax whereby companies with profit before tax above the MYR100 million will be taxed at a rate of 33%, instead of 24% for the first MYR100 million. This would affect a number of large cap companies, including banks, property, constructions, and utilities, as it is not specific to the gloves sectors as the market anticipate earlier. This is expected to be imposed in the 2022 assessment year and we estimate about 85% of the top 100 market cap companies’ net profit will be affected negatively, as mentioned in our previous report. Overall, the government expects GDP growth for 2022 at 5.5-6.5% YoY, expanded from 2021 that is expected to grow around 3.5% YoY and in line with the expectation of an improved fiscal deficit of 6.0% in 2022 from 6.5% in 2021. For more information, please refer to the previous Malaysia Budget 2022. For this month, we have made no changes to the portfolio allocation.
Equity
FBMKLCI rose by 1.59% MoM in October to close at 1,562.31 points. Looking at the trading participants for the month, local retailers and foreign investors were both net buyers, buying MYR327 million and MYR1.57 billion worth of shares, respectively. On the other hand, local institutions were the only net sellers selling MYR1.9 billion worth of shares. For year-to-date (YTD), local institutions and foreign investors were the net sellers, selling MYR8.53 billion and MYR2.18 billion worth of shares, respectively, while the local retailers were net buyers, buying MYR10.7 billion.
Most sectors in Malaysia were in the positive territory in October except for healthcare which fell by 4.09% MoM amid persistent sell-off from the glove counters as Covid-induced demand eases on the back of normalization in economic activities. Other sectors namely property, energy, plantation, technology, construction, finance, transport, consumer, industrial, product, telecom, and utilities rose by 8.75%, 7.85%, 7.28%, 4.49%, 4.43%, 2.51%, 1.87%, 1.26%, 1.25%, 0.74%, and 0.27% MoM respectively.
Bond
In October, the yield for the Malaysian Government Securities (MGS) for the 3-year, 5- year, 7-year, and 10-year rose by 24bps, 32bps, 18bps, and 21bps to close at 2.68%, 3.24%, 3.48%, and 3.58% respectively.
Commodities
Nymex (WTI) crude oil price climbed 11.38% MoM in October, closing at USD83.57/barrel from USD75.03/barrel in September week on. The oil price continued to rally ahead of the winter season due to the ongoing energy undersupply concern. Crude palm oil went up by 11.77% MoM to close at MYR5,402/MT in October compared to MYR4,833/MT in the previous month. Meanwhile gold price rose by 1.63% MoM to close at USD1,783.90/Oz in October, as compared to USD1,755.30/Oz in September.
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