KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
After a stellar year for U.S. stocks, with the S&P 500 up over 23% in 2024, investors are cautiously optimistic about the "Santa Claus Rally"—a seasonal boost traditionally seen in the final days of December and early January. However, rising Treasury yields, a hawkish Federal Reserve, and narrowing market breadth suggest Santa might disappoint this year.
Key Highlights
1. Historical Context
- The Santa Claus Rally period, comprising the last five trading days of December and the first two of January, has historically yielded an average 1.3% S&P 500 gain, according to the Stock Trader’s Almanac.
- Positive performance during this period is often seen as a harbinger of gains for the following year, with a 90% success rate when paired with other January indicators.
2. Market Challenges
- Biggest Drop Since August:
- The S&P 500 fell sharply on Wednesday after the Federal Reserve signaled fewer rate cuts in 2025 than expected.
- Sector Struggles:
- Eight of 11 S&P 500 sectors are down for December, with the equal-weight S&P 500 losing 7% this month.
- Rising Treasury Yields:
- 10-year yields reached 4.55%, the highest in six months, pressuring equity valuations.
Valuation Concerns
- The S&P 500 is trading at 21.6 times forward earnings, well above its historical average of 15.8 times, raising concerns about overvaluation.
3. Seasonal Trends and Risks
- November's 5.7% S&P 500 gain, driven by Donald Trump's election victory, may have pulled forward the year-end rally, dampening December's potential.
- Narrowing breadth:
- 13 straight sessions of declining S&P 500 components outpacing gainers—the longest streak since 2012.
- Only 56% of S&P 500 stocks trade above their 200-day moving averages, the lowest level this year.
4. Notable Winners in December
- Tesla: +26%.
- Alphabet: +12%.
- Broadcom: +35%, fueled by AI chip demand and surpassing a market value of US$1 trillion.
Market Outlook
- Cautious Optimism: Some analysts believe this week's selloff could eliminate excessive froth, setting the stage for a potential rebound.
- Strategic Patience: Experts recommend waiting for improved momentum and established support before buying dips.
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