Malaysian equity stands to gain Trump’s first 100 days
KUCHING: With Asian markets generally outperforming months after the inauguration of Donald Trump as president of the US, analysts favour Asian markets – especially Malaysia’s – for its attractive valuations and positive earnings revision momentum.
To note, April 29, 2017 marked Trump’s first 100 days in the White House. This also marked the time to turn words into action through legislation.
Trump entered the White House with a handful of cards up his sleeves – pro- trade policies, promise of infrastructure spending, more job creation, improving security at the borders and noninterference in foreign affairs – all these are to ‘Make America Great Again’.
However, expectations on a big stimulus are dissipating and markets were disappointed by his failure to push through legislation and cement policies into law, said researchers at AmBank ( M) Bhd (AmBank Research).
“Although Trump may have scored a narrow win with the US House of Representatives repealing the healthcare bill; a tougher hurdle lies ahead when the bill goes to the Senate for consideration,” it detailled in a note yesterday.
“Although the stock market rally was driven by the market’s optimism on Trump’s policies, subsequent disappointing news from the administration has not triggered significant unwinding of the rally.
“This was mainly because the gap left by Trump was filled with strong US corporate earnings.”
Asian markets generally outperformed after Trump’s inauguration, it added, as there were fund outflows from the US market in view of its rich valuation to other
Although Trump may have scored a narrow win with the US House of Representatives repealing the healthcare bill; a tougher hurdle lies ahead when the bill goes to the Senate for consideration.
markets with cheaper valuation.
“Furthermore, market expectations on the speed of Federal Reserve rate hikes and the US dollar’s strength have been gradually fading during this period, which supported the Asean markets,” AmBank Research added.
IT further observed that Malaysia’s FBM KLCI has recovered by 100 points or six per cent to 1,768 during these 100 days as the US dollar weakened and the new president became more pro-trade.
Bond prices have also been on a rising trend with yields moderating by 18bps to 2.29 per cent since he entered the White House after falling to as low as 2.17 per cent in mid-April 2017.
Accordingly, bond yields in emerging markets have fallen on inflows including on the local front, where the Malaysian Government Securities yields fell 21 basis points to 4.04 per cent.
“We maintain our neutral view on US equity as outlined in our previous report and expect the S& P500 to gradually retrace to 2,280,” it highlighted.
“Any further pullback of US financial stocks is an opportunity for investors to participate in a potential structural style shift toward value investing from growth.
“Outside of the US, we favour HK and Malaysia markets due to their attractive valuations and positive earnings revision momentum.”
AmBank Research