• Home

KLSE Bursa Malaysia Blog One-Stop

KLSE or Bursa Malaysia stock market latest blogs, KLCI and stocks news updates.

  • Home

Blogger's Blog Updates

  • Millionaire Trend Trader
    FBM KLCI - closed at intraday high on continued buying in heavyweights - Stocks on Bursa Malaysia ended higher Tuesday with the benchmark FBMKLCI closed at the intraday high, marking its fourth consecutive session of strong p...
    9 hours ago
  • A PEGGY Method of Stock Market Share Fair Value Target Price IPO Dividend
    EPF Yearly Dividend - Source: The Star
    5 years ago
  • A PEGGY Method of Stock Market Share Fair Value Target Price IPO Dividend
    EPF Yearly Dividend - Source: The Star
    5 years ago
  • Blackspy fundamental
    Good Bye Maybank 2 Gold Cards~ - I used to use Maybank 2 Gold Cards for last few years. But after revise cashback policy. It is not as attractive as before. I do believe Public Bank Qua...
    5 years ago
  • Bursa Malaysia Stock Market Analysis Digest
    Technical - SKPRES (7155) - SKP RESOURCES BHD SKPRES has gapped- - up to close above the EMA20 level accompanied by improved volumes. The MACD Indicator has issued a BUY Signal, while...
    6 years ago
  • Bursa Malaysia Stocks and Shares Analysis
    FBM KLCI and Malaysia GE14 - Last Friday, PM Najib announced the dissolution of Parliament. In the past, polling was held 17-32 days after dissolution. We believe the first weekend of ...
    7 years ago
  • KLSE Bursa Malaysia Blog One-Stop
    Bursa Malaysia Shares: Stimulus Hopes and Oil Price to Underpin Sentiment - Bursa Malaysia shares managed to rebound from early decline in choppy trade Thursday, in line with most of the regional markets as weak trade data from Jap...
    8 years ago
Home » Bursa Malaysia Outlook » World equity market: Do not worry – it is climbing the wall

World equity market: Do not worry – it is climbing the wall

  Joehari Matt    

FBM KLCI: 1,785.88    (2014 Year-end Target: 1,900 points)


The world is transitioning to a more normal monetary as well as macro environment.
The US Fed is slowly taking away  the  QE3  liquidity  punchbowl  with  the  pace  of  monetary  normalization  “tied  to  what  happens  in  the economy”.  While  the  recovery  in  advanced  economies  has  thus  far  been  rather  measured,  nonetheless  it  is  also uneven  at  times  hence  the  transition  process  will  not  likely  be  smooth  and  predictable.  This  uncertainty  may contribute to intermittent heightened volatility in the world’s risk asset prices.

In  our  Strategy  note  dated  28  June  2013  (para  4&5), we  alluded  to  the  following  outcomes  in  light  of  the normalizing monetary and macro environment:
There  are  instances,  principally  during  a  period  when  the  real  economy  is  gaining  on  its  recovery traction, wherewith the trend in equity prices might turn out to be flat and even scaling up against the backdrop  of  rising  interest  rates  or  of  the  perception  thereof.  This  is  due  to  positive  numerator  effect with  regard  to  corporate  earnings.  In  technical  parlance,  this  situation  could  be  dubbed  as  the  market “climbing the wall of worry”. [emphasis added]

Therefore,  the  QE3  taper  may  have  brought  heightened  liquidity  risk  premium  to  the  broad  equity valuations. Nonetheless, despite the higher cost of capital denominator, expected rising income stream as a result of brighter economic conditions may, all in all, be positive to equity secular pricing dynamics. [emphasis added]

Scaling up the “wall of worry”. Accordingly, major equity markets particularly in the US and Euro region scaled up the “wall of worry” with gusto as evident by spate of new all-time (US indices) and multi-year (Euro indices) highs in  the  final  quarter  of  last  year.  Locally,  the  FBM  KLCI  too  recorded  numerous  new  all-time  highs  in  the  closing quarter of 2013.

In the same Strategy note (para 6), we also suggested that:
Furthermore,  during  period  when  the  market  is  climbing  the  proverbial  “wall  of  worry”,  volatility generally rises due to the flare up in tug-of-war between the so-called optimists and pessimists elements in the market. [emphasis added]

Market  ripe  for  meaningful  correction  after  a  hearty  run. Thus  after  a  gravity-defying  performance  in  the  last quarter,  the  US  (and  European)  stocks  which  were  overwhelmed  by  the  optimists  are  now  ripe  for  a  meaningful correction. An exit trigger was provided by a limited contagion from some emerging economies (particularly those suffering  from  the  twin  deficits  and,  in  some  cases,  coupled  with  domestic  socio-political  uncertainty)  which  are battling with currency depreciation due to heightened pace of liquidity withdrawals of late. Also, the recent below consensus US ISM-Manufacturing number provided the pessimists another exit opportunity that resulted in the Dow Jones  Industrial  Average  (DJIA)  shedding  more  than  300  points  in  a  single  day  on  3  February  2014.  In  unison,  the local benchmark dropped as well.

FBM KLCI is expected to  remain on its secular upward trajectory. While the heightened volatility latterly could be  unnerving,  let  us  be  reminded  that  the  normalizing  monetary  and  macro  environment  may,  “all  in  all,  be positive to equity secular pricing dynamics.” Thus despite the recent volatility, we reiterate our view that the FBM KLCI  is  expected  to  remain  on  its  secular  upward  trajectory  at  least  until  end  of  the  year,  supported  by expectations  of  (i) gentler  yet  still  robust  domestic  growth  momentum,  and  (ii) brightening  external  economic
conditions.  Additionally,  we  do  not  expect  the  recent  capital  flight  from  countries  suffering  the  twin  deficits  and domestic  uncertainty  would  become  out  of  control  that  it  may  result  in  a  full-blown  contagion  to  other  emerging market currencies.

 

 

FBM  KLCI  entry  point  target  at  1,750-1,700  points  range. While  remain  positive  on  the  secular  trajectory  of FBM KLCI, we however do not think the recent correction has played itself out just as yet. Hence, on the downside, we reiterate our view of the local benchmark support levels at between 1,750-1,700 points range.

 

…with market upside capped by liquidity, earnings, monetary and valuation factors. Although we do not expect the  market  to  enter  into  a  bear  territory  this  year,  nor  do  we  expect  the  FBM  KLCI  to  repeat  its  rather  stellar performance  last  year.  In  our  opinion,  the  following  factors  may  put  a  cap  to  the  prevailing  above-mean  market valuation going forward: (i)the incessant albeit generally measured withdrawal of foreign liquidity (pursuant to the commencement of QE3 taper) to continue on in the months to come,  (ii)comparatively muted FBM KLCI expected earnings  growth  of  circa  10%  in  2014,  (iii) market  expectation  of  a  hike  in  the  OPR,  and  (iv) Malaysia’s  relatively weak albeit improving current account situation.

Reaffirm our FBM  KLCI 2014 year-end target of 1,900 points
. We  reaffirm our FBM KLCI  baseline 2014 year-end target of 1,900 points, with the upper and lower bounds at 1,980 points and 1,840 points respectively.

 

by MIDF

Blogger's Blog Updates

  • 1KLSE
    KPJ Healthcare Berhad - Announcement - Oct 07, 2021 Dear investors, The following announcements have been uploaded into KPJ Healthcare Berhad Investor Relations website. - Changes In S...
  • Talk About Share Market
    Be cautious of small caps run on Bursa - THE small to medium caps run on the stockmarket this round is not quite the same as previously when their share prices were ramped up as a result of specul...
  • davors investment setting
    Stock Track - 13 APRIL 2011 (BJTOTO) - Will have a look on BJTOTO for coming few days as rumors flow. KUALA LUMPUR, April 12 — Tycoon Vincent Tan is considering selling a 49 per cent stake in th...

News

Links

  • KLSE 2U
  • Bursa Malaysia My Blog
  • KLSE Online
  • Malaysia Bursa

About

KLSE Bursa

Web Links

  • Privacy Policy
Copyright © KLSE Bursa Malaysia Blog One-Stop. All rights reserved. Template by Romeltea Media | Published by FLYTemplate