Strategy � KLCI (POSITIVE, maintain)

Top Calls

Strategy � KLCI (POSITIVE, maintain) - Mind the gap It has not been a normal year in 2016 with the breadth of headwinds buffeting financial markets. We believe we are not alone in hoping for a more sedate 2017. Our assessment points to a Fed funds rate hike becoming a major focus in 2017. We build a DCF model to assess the impact of a Fed hike on the US stock market and the KLCI. We have highlighted before that Malaysia is on a significantly better footing to weather a Fed hike given its positive savings-investment gap, fiscal consolidation trajectory, high foreign reserves, positive interest rate differential over the US and ample liquidity in the financial system. Nonetheless, Malaysia�s current account surplus narrowed in 2Q16, prompting fears of a further deterioration; our analysis indicates that this should mark the trough, barring further external weakness. We introduce our 2017 year-end KLCI target of 1,760 with reasonable upside from current levels. Hence, we remain Positive on Malaysia.

Other Calls

Results note � MISC (SELL, maintain) - Rough seas

Results note � Petronas Chemicals (SELL, maintain) - Supported by stronger margins

Results note � Petronas Gas (HOLD, maintain) - No surprise in result

Economic Update� Malaysia Economic Outlook 2017 - 2017E GDP growth of 4.4%, a tad higher than 2016

Economic Update� US Economy Monetary Policy - No change to US Fed�s FFR, but tone slightly hawkish

Morning News and Market Summary

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