Weekly Market Update - 3 August 2015

Market Outlook

 Equity Market Outlook

• We do not expect recent political developments to have much impact on the stock market.
• We expect the Ringgit to remain weak due to the expected Fed rate lift-off by the end of the year.
• We still like export-oriented stocks that will benefit from depreciating Ringgit.

Fixed Income Outlook

• Last week, there was selling on the short end by foreign investors as rising borrowing costs of the ringgit reduced the attractiveness of the local carry trade. Overall, the yield curve rose 7-18 bps across the curve with the belly of the curve rising the most. There was a muted response in the Malaysian Government Securities (MGS) market on the day of the cabinet change. However, the bond market grew weaker towards the end of the week.
• Ringgit will probably remain weak with significant downside as long as the political uncertainty remains. Non-Deliverable Forwards (NDFs) are priced much higher compared to the onshore rates, signalling higher shorting interest amongst the offshore players.

Source: Lipper for Investment Management, as at 31 July 2015

 

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