Key in­dex’s best per­for­mance since Au­gust 2015 as in­vestors re­act well to Fed rate hike

New Straits Times - - Front Page - RUPA DAMODARAN KUALA LUMPUR ru­pa­banerji@me­di­aprima.com.my

BURSA Malaysia and the ringgit ral­lied yesterday af­ter in­vestors re­acted warmly to the United States Fed­eral Re­serve’s (Fed) in­ter­est rate hike.

An­a­lysts said the lo­cal bourse ral­lied to its high­est level in 19 months. On Au­gust 3 2015, the in­dex had hit a high of 1,744.19.

Yesterday, the bench­mark FTSE Bursa Malaysia KLCI edged up 1.15 per cent, or 19.78 points, to set­tle at 1,737.14.

The 25-ba­sis-point Fed hike to the 0.75-1.00 per cent range prompted a pos­i­tive spillover ef­fect on Bursa Malaysia and other re­gional mar­kets, said an­a­lysts.

“The per­for­mance of the lo­cal bourse was in tan­dem with re­gional peers,” said JF Apex Se­cu­ri­ties.

The ringgit, mean­while, opened at 4.4360 against the US dol­lar and at 5pm, it was traded at 4.4390 from Wed­nes­day’s close of 4.4488.

AmBank Bhd said the stronger ringgit was also in­flu­enced by ex­ter­nal noises as crude oil price rose to US$49.09 (RM27 1), buoyed by bullish in­ven­tory data.

It noted that the green­back dipped 1.24 per cent mainly due to the Fed not mak­ing any changes to its rate pro­jec­tions and re­assess­ment of the eco- nomic out­look.

Hong Leong In­vest­ment Bank Bhd (HLIB) said the less hawk­ish tone led to a de­cline of the dol­lar.

UOB Bank noted that the Fed­eral Open Mar­ket Com­mit­tee con­tin­ued to have a pos­i­tive out­look on the econ­omy and labour mar­ket, while higher prices were also on the cards as in­fla­tion had in­creased in re­cent quar­ters.

The bank main­tained its forecast of three US rate hikes this year, say­ing the next two hikes would be in June and Septem­ber.

“One of the rea­sons for our hawk­ish Fed rate tra­jec­tory out­look in the com­ing years is due to (US Pres­i­dent Don­ald) Trump’s likely ex­pan­sion­ary US fis­cal poli­cies and we will watch Trump’s bud­get pro­posal closely,” said UOB Bank econ­o­mist Alvin Liew.

HLIB ex­pects an­other two rate hikes this year, look­ing to a boost from Trump’s pro-growth pol­icy.

It has main­tained its ringgit forecast at 4.30-4.55 ver­sus the US dol­lar this year.

“While bond out­flows may con­tinue, ringgit sup­port comes mainly from higher com­mod­ity sur­plus as well as Bank Ne­gara Malaysia’s for­eign ex­change mea­sures that pro­vide a buf­fer to counter the bond out­flows.”

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