Second half of 2017 will remain challenging, says AmBank Research

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KUALA LUMPUR (Aug 16): The second half of 2017 (2H2017)will remain challenging with room for short-term trading opportunities on safe haven assets, especially when uncertainty grows, according to AmBank Research.

In a macro strategy report today, AmBank research head Anthony Dass said despite a rather rough week for the financial markets last week due to Trump’s tough talk on North Korea, overall the markets’ reaction was relatively subdued with the MSCI World index dipping just 1.5%.

“Although we noticed the impact on equities market due to the ongoing geopolitical concern has been small, we need to be mindful of volatility, at least in the near term.

“Investors should be ready for more uncertainties in the short term. The focus will be on the market multiples rather than the real economy,” said Dass, who is also AmBank group chief economist.

He said that in the event the sell-down intensifies on further market concerns, the technical outlook suggests a potential drop of around 3.62% and 3.70% for the DJIA and MSCI AP index respectively in a bearish scenario, while AmBank’s fundamental analysis indicates a low end of 5% – 6% for both markets in the near term.

“In the case of the FBM KLCI, if the selling intensifies, we foresee the technical downside to be around 2.4% while our fundamental analysis suggests a low end of 4% – 5% on an immediate note.

“What happens when the geopolitical tension eases? The focus will again be on incoming data from major economies and on the language of major central banks.

“Thus, we believe the 2H2017 will remain challenging with room for short-term trading opportunities on safe haven assets, especially when uncertainty grows,” he said.

Dass said if the situation improves, investors could be looking at companies with “value”, and beneficiary of cyclical upturn and earnings momentum as well as growth stories.