KUALA LUMPUR, Dec 5 (Bernama) -- Bursa Malaysia closed lower on Friday amid mixed regional market performance as investors turned cautious over a possible rate hike by the Bank of Japan (BOJ) and upcoming US economic data that may influence the Federal Reserve’s (Fed) interest rate decision next week. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) pared most earlier losses to settle 4.55 points easier, or 0.28 per cent, to 1,616.52 from Thursday’s close of 1,621.07. The benchmark index, which opened 0.37 of-a-point lower at 1,620.70, moved between 1,609.67 and 1,621.25 throughout the day. The broader market was negative, with decliners outpacing advancers 604 to 439. A total of 550 counters were unchanged, 1,151 untraded, and 18 suspended. Turnover declined to 3.17 billion units worth RM2.24 billion from 4.48 billion units worth RM2.75 billion yesterday. Rakuten Trade Sdn Bhd vice-presiden...
The shift from megacap tech dominance to broader market participation is gaining traction, with small-cap stocks poised for outperformance in an easing interest rate environment.
Small-Cap Indices Outperforming
S&P Small Cap 600: +6% over the past three months
Russell 2000: +7% in the same period
Still behind Nasdaq 100: +9%, but momentum is shifting
With the Fed expected to cut rates in the coming month—barring a surprise from inflation or jobs data—small caps are well-positioned due to their sensitivity to interest rate movements.
Why Small Caps Now?
Floating-Rate Debt Exposure: Small-cap companies typically hold more floating-rate debt, benefiting directly from rate cuts.
Lower Valuations:
S&P 600 is trading at 17x forward earnings, roughly 30% cheaper than the S&P 500.
Historically, the discount averages closer to 25%.
Sector Strengths: Russell 2000 is overweight in financials, industrials, and healthcare—sectors still offering value.
“It’s the stealth summer of small caps,” said Francis Gannon, Co-CIO of Royce Investment Partners. “The broadening of the market rally is something investors have to pick up on.”
Strategy Insights from Analysts
Francis Gannon (Royce Investment Partners):
Favors small-cap value stocks
Highlights:
$Evercore (EVR.US)$ – strong IPO market rebound
$ESAB Corp (ESAB.US)$ – welding tools
$AAON Inc (AAON.US)$ – HVAC systems
$YETI Holdings (YETI.US)$ – premium outdoor gear
$Advance Auto Parts (AAP.US)$ – auto parts retail
Bank of America (Jill Carey Hall):
Top performance styles during rate cuts:
Value > Growth
Quality > Risk
Screened Russell 2000 for:
Attractive valuations
Dividend history or share buybacks
Healthy return on invested capital
Top picks include:
Homebuilders:
$Meritage Homes (MTH.US)$
$Taylor Morrison Home (TMHC.US)$
Auto-related:
$Visteon (VC.US)$
$Asbury Automotive (ABG.US)$
$Group 1 Automotive (GPI.US)$
Industrials:
$Blue Bird (BLBD.US)$ – school buses
$Rush Enterprises (RUSHA.US, RUSHB.US)$ – commercial trucks
Bottom Line: Think Small for Big Gains
With valuation support, policy tailwinds, and sector rotation underway, small-cap stocks offer attractive upside potential—especially in value and industrial plays.
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