Market Review
Equity market in March managed to close positively after a good run up in
February even though it experienced a brief correction in early part of the
month. This reflects strong rebound on dovish statement in the recent FOMC
meeting in its approach to future interest rate hikes. China was the best
performing market in March with MSCI China up 2.4%, on the back of policy
easing and reform while the KLCI gained 0.58% or 9 points to close at 1,831
points. The broader market continued to underperformed, with the FBM Emas
Shariah Index gaining 0.01% while the FBM Small cap index fell 2.00%.
The energy sector underperformed on lower crude oil prices (certain large caps
were also impacted by impairments/provisions) as Brent crude oil price
retreated to as low as US$51.33/bbl during the period from US$61.8/bbl endFebruary
(-13.7% change). Besides, the strengthened Ringgit following the FOMC
meeting has reverted to RM3.7035 per USD at the end of March as the market
was cautious ahead of the GST implementation on the 1st of April which could
see slower consumer spending in the next few months.
In terms of market valuations, we are cognisant that the market is trapped
between reasonable valuations but having lack of upside catalysts. The Price to
Book basis is trading at below -1 standard deviation of its 5 year average level
but the Price to Earnings ratio is trading at +1 Standard deviation of its 5 year
average level. Hence, suggesting that the market could be caught in a range
bound trend unless earnings growth pick up.
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