Market Outlook as at November 5, 2018

Over the weekend, we have 2 pieces of good news; a sensible budget from our Finance Minister and a possible resetting of the trade war rhetoric between the US and China.

On the local front, I am encouraged by the following:

1. We are not strait-jacket by deficit reduction target; the Budget is relatively expansionary. 

2. There are additional or new taxes but they are not broad-based (except for sugar-tax on beverages). 

3. The proposed tax amnesty can be a good source of revenue.

4. There is effort made to address the need of house buyers - which may help to inject life into the property development and construction sectors.

This Budget, along with the final determination of legacy projects, should give clarity to the business & investing community to make their decision in 2019. Hopefully this will reinvigorate private investment - and boost our stock market. I am cautiously optimistic that FBMKLCI can go up to 1750.

Chart: FBMKLCI's daily chart as at Nov 5, 2018_9.30am (Source: Malaysiastock.biz)

On the foreign front, the unexpected happened. Trump has proposed a meeting with Xi prior to the G20 leaders summit in Buenos Aires (Nov 30 to Dec 1) plus a formal dinner with Xi after the summit (here). Whether these 2 events could lead to a resolution of the trade war between the US and China remains to be seen, but the motivation behind them suggests that Trump has begun to walk back his belligerent policies towards China. Once the relationship between both nations is on the mend, trades & investment will flow again. Global economy and stock market may be given a new leaf of life.