KUALA LUMPUR: BIMB Securities Research has adopted a more defensive stance on Malaysian equities, expecting the FTSE Bursa Malaysia KLCI (FBM KLCI) to trade within a narrow range as a global technology sell-off and falling commodity prices weigh on market sentiment.
The firm said the benchmark index was likely to consolidate between 1,610 and 1,630 points, with the 1,600-point psychological level serving as a key support amid heightened external uncertainties.
It said the investment strategy had shifted towards defensive sectors, particularly banking and domestic infrastructure, as institutional investors moved away from export-oriented manufacturers and technology stocks.
“High-conviction institutional rotation has abruptly abandoned export-driven manufacturing champions in favor of defensive financial heavyweights and domestic infrastructure anchors, creating a localised insulation layer to defend the solid 1,600 psychological support baseline against intense post-election global monetary pressure,” it said.
BIMB Securities said the shift followed a sharp correction in global technology shares, driven by concerns over tighter artificial intelligence (AI) regulations in the United States following its midterm elections.
The sell-off also spread across Asian markets, with Taiwan’s TWSE, South Korea’s KOSPI and Japan’s Nikkei falling 12.2 per cent, 11.7 per cent and 9.3 per cent respectively last week, reflecting their exposure to the global AI hardware supply chain.
The FBM KLCI closed at 1,616 points, up 0.31 per cent week-on-week last week, but remained down 3.78 per cent year-to-date.
Despite the external volatility, BIMB Securities said foreign investors remained net buyers of Malaysian equities, recording net inflows of RM381 million for the week ended Nov 6.
“The major inflow came into the financial, transportation and construction sectors, with Public Bank attracting RM154.2 million, Westports Holdings RM140.5 million and Malayan Banking RM100.9 million in net foreign purchases,” it said in a note.
The firm said the financial sector gained 2.2 per cent week-on-week, supported by its defensive characteristics and Bank Negara Malaysia’s decision to maintain the overnight policy rate at 2.75 per cent.
However, the technology and energy sectors were the biggest laggards, declining 9.0 per cent and 6.7 per cent respectively last week as investors reassessed earnings prospects amid the global technology rout and weaker oil prices.
BIMB Securities said the sharp correction in commodities had also changed the outlook for Malaysia’s energy and plantation sectors.
Brent crude fell 16.4 per cent to US$98 per barrel, as expectations of a diplomatic de-escalation in the US-Iran conflict reduced geopolitical risk premiums.
Crude palm oil prices also declined 9.0 per cent to RM4,049 per tonne, weighed down by record-high stockpiles and weaker crude oil prices, which reduced the profitability of biofuel production.
In contrast, gold rose 5.1 per cent to US$4,070 an ounce as investors sought safe-haven assets amid economic uncertainty.
The ringgit remained stable at RM4.06 against the US dollar, despite a 0.4 per cent increase in the US dollar index to 102.3.
BIMB Securities said the domestic banking sector and infrastructure-related stocks were expected to provide some insulation against external market volatility, supported by Malaysia’s underlying economic resilience and infrastructure investment pipeline.
It added that robust domestic fundamentals could help cushion the impact of weaker global technology and commodity markets, although they were unlikely to drive aggressive gains in the benchmark index in the near term.
“Institutional capital is actively retreating from high-alpha tech and commodity proxies, exploiting robust domestic banking fundamentals to protect against ongoing capital flight from the US chip stock collapse and plunging crude oil and CPO prices,” it said.
For its preferred stocks, the firm maintained a “Buy” call on Gamuda Bhd, Inari Amertron Bhd and Dialog Group Bhd, with target prices of RM5.91, RM2.90 and RM2.40 respectively.
It also identified CIMB Group Holdings and Malayan Banking as preferred banking exposures, although both were not rated.
The key risks to watch include tighter AI regulations in the US, potential supply chain disruptions and further weakness in crude oil and crude palm oil prices, which could weigh on corporate earnings and trigger further portfolio reallocation.