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December historically positive for KLCI, says CIMB Research


KUALA LUMPUR: The FBM KLCI has historically posted positive returns in December, says CIMB Equities Research.

Over the past 10 years, the KLCI recorded an average month-on-month gain of 2%. Over a 40-year period, it posted an average month-on-month decline of 3.6%. 

“We maintain our end-2018 KLCI target of 1,684, which is based on 15.7 times 12 months forward P/E, and our top three picks (Dialog, MPI and Westports),”it said in in strategy report issued on Tuesday.

CIMB Research pointed out that in November, the KLCI posted its third consecutive monthly decline of 1.7% month-on-month.

The KLCI fell 29.4 points to close at 1,679 points at end-November. As a result, KLCI’s YTD losses widened to 6.5%. 

“We believe the decline could be due to foreign selling, weaker-than expected results from earnings season, and losses in the Genting group’s share prices,” it said.

The latter was due to higher gaming taxes announced in Budget 2019 as well as news that the group has filed a US$1bn legal suit against Walt Disney Co and Twenty-First Century Fox Inc over the cancellation of the first Fox-branded theme park. 

CIMB Research said foreigners were again net sellers in November with a net ouflow of RM700mil.

In November, the KLCI underperformed the FTSE Bursa Emas or the broader market but outperformed the small-cap sector. 

The KLCI also underperformed the MSCI Asia Pacific ex-Japan Index (MXASJ) by 6.9%. It was also the worst performing MIST (Malaysia, Indonesia, Singapore and Thailand) market in November.

On the local front, domestic and foreign investors will be watching out for the release of Felda white paper, outcome of the semi-annual KLCI review and on-going developments in Lembaga Tabung Haji. 

Another event in focus is the anti-ICERD protest on Dec 8. PAS and Umno have declared they would join the rally, as will members of Malay rights group Perkasa. 

On the external front, investors will be following closely: (1) the Opec meeting on 6 Dec; (2) the FOMC meeting on 18-19 Dec; (3) ECB ending its bond-buying programme; and (4) the latest developments of the ongoing US-China trade tensions.

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