We take an in-depth look at the market in March 2023.
Contents
Market Outlook
The FOMC March will be held on the 22nd and 23rd March and will be in the limelight for this month as investors seek clarity from the dot plot. In the meantime, investors appear to be transitioning to a “wait and see period”, debating between if Fed is nearing the end or needs to get more aggressive again. The debacles worsened when the PCE index and core PCE index jumped 5.4% YoY and 4.7% YoY, crushing market expectations of 5.0% YoY and 4.3%, respectively. Since this is widely considered as the Fed preferred inflation gauge, hotter-than-expected inflation readings have forced investors to think again their expectations about how high the Fed will drive interest rates. Majority of market consensus priced in for a 50bps rate hike (70.5% probability) after Powell’s hawkish remark before his testimony to the Congress. Powell said the Fed will not rule out bigger rate hikes at the upcoming FOMC March to tame stubborn inflation as Powell maintains his objective and unwavering in the pursuit of bringing inflation under control.
Meanwhile, China set this year’s growth target at “around 5%” as the National People’s Congress kicked off on 5th March, with the keyword “stability” mentioned 38% more times this year than in 2022. This marked it as the most frequent use of the keyword under Xi Jinping, who became president early in 2013, while at the same time, Premier Li Keqiang stressed that China would stabilise prices, employment, and supply chains. The government budget deficit target was set at 3% of GDP, widening from a goal of 2.8% last year as spending was set to rise to 5.6% in 2022, while the consumer inflation target will be kept at 3.0%. Nevertheless, Premier Li is set to step down this month leaving his final work with the phrase “Comrade Xi Jinping at its core” (used it seven times, tied for the most with 2022). This serves as a barometer of Xi’s power, so this high frequency signals that he has solidified his position since the Politburo of the Chinese Communist Party last October. This is not new.
Malaysia Prime Minister and Finance Minister, Anwar Ibrahim presented a bigger spending plan for 2023, taking advantage of higher government revenue after stronger than expected Malaysia’s economic growth last year. The Budget 2023 unveiled a record MYR386.1 billion, with a themed “Membangun Malaysia MADANI” guided by the MADANI policy framework allocated 74.9%, or MYR289.14 billion for operating expenditure and the remaining 24.9%, or MYR96.3 billion for development expenditure for 2023. Although national polls have already passed, Budget 2023 is still seen as an “election budget” because six states are expected to head to the ballot box in July, with about half of Malaysia’s electorate casting their vote. The result of this vote will have a huge impact on the stability of Anwar’s unity government as the current so-called unity government was cobbled together after the election resulted in Malaysia’s first ever hung Parliament.
Hence, for this month, we made no change to our model portfolio allocation for March as we maintain our view of conservative tactical asset allocation while we wait for FOMC March and the new dot plot to be unveiled.
Equity
FBMKLCI fell 2.11% MoM in February to close at 1,454.19 points. Looking at the trading participants for the month, both local institutions and foreign investors were the net sellers, selling MYR259.83 million and MYR168.43 million worth of shares. Local retailers were the net buyers, buying MYR428.23 million worth of shares. For year-to-date (YTD), foreign investors are the net sellers, selling MYR516.66 million worth of shares, while the local institutions and local retail were net buyers, buying MYR494.50 million and MYR22.12 million worth of shares.
For February, Property and Construction rose by 0.02% and 0.87% MoM, respectively. Industrial Product, Technology, Energy, Healthcare, Consumer, Telecom, Transportation, Finance, Plantation and Utilities sectors fell by 6.58%, 5.32%, 4.92%, 4.38%, 2.44%, 2.10%, 1.47%, 1.33%, 0.92%, and 0.75% MoM, respectively.
Bond
In February, the yield for the Malaysian Government Securities (MGS) for the 3-year, 5-year, 7-year and 10-year increased by 13bps, 12bps, 10bps, and 11bps closing at 3.52%, 3.67%, 3.79%, and 3.91%, respectively.
Commodities
Nymex (WTI) crude oil price fell by 2.31% MoM in February, closing at USD77.05/barrel. Crude palm oil gained 10.56% MoM to close at MYR4,113.00/MT in February, amid the suspension of an export permit by Indonesia. Gold price decreased by 4.81% MoM to close at USD1,836.70/Oz in February.
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