Market players react positively to 2019 Budget

KUALA LUMPUR: The 2019 Budget, the first released by the Pakatan Harapan-led government, has shown signs of revival in market players' confidence with both the stock market and ringgit giving positive reaction.

Presented by Finance Minister Lim Guan Eng on Nov 5, the RM314.5 billion budget was carefully crafted to help to balance fiscal discipline and growth, as well as to ensure country's developments for the benefit of the people.

Malaysian Industrial Development Finance Bhd (MIDF) Research Analyst Adam Mohamed Rahim said international funds staged a solid comeback to Bursa Malaysia as they turned into net buyers after four straight weeks of selling.

He said based on preliminary data from Bursa Malaysia, foreign funds accumulated RM322.7 million net of local equities last week (Oct 29-Nov 2), offsetting the RM310.1 million net withdrawn in the preceding week (Oct 22-26).

On the external front, he said investors were also comforted by reports that US President Donald Trump wanted to reach a trade deal with China during the G20 Summit this month, prompting global equity markets to march back into the black.

“After five weeks of foreign net outflows, international investors made a comeback to Asian

After five weeks of foreign net outflows, international investors made a comeback to Asian markets, accumulating US$1.22 billion foreign net last week for the seven Asian exchanges, offsetting approximately 32 per cent of the net outflow seen in the preceding week. Adam Mohamed Rahim, MIDF Research Analyst

markets, accumulating US$1.22 billion foreign net last week for the seven Asian exchanges, offsetting approximately 32 per cent of the net outflow seen in the preceding week,” he added.

Nevertheless, Kenanga Research said the higher-thanexpected budget deficit numbers of 3.7 per cent for 2018 might keep foreign investors away from the local equity market in the shortterm.

The research house said this was due to higher depreciation pressure on the ringgit despite the government's efforts to improve the deficit numbers in the next couple of years.

“All in all, while the market could stage a further rebound from here, the upside could be limited,” it added.

Malaysia's 2018 fiscal deficit is expected to be higher at 3.7 per cent due to previous government's spending commitment. However, the new government is committed to implement fiscal consolidation measures to reduce deficit to 3.4 per cent in 2019, 3.0 per cent in 2020 and 2.8 per cent in 2021.

FXTM Global Head of Currency Strategy & Market Research Jameel Ahmad said volatility in the ringgit this week could be something that investors should not rule out as global developments would mostly dictate movements in emerging market assets this week.

“This week is widely expected to be another wild one for emerging markets with the Federal Reserve meeting and upcoming US midterm elections something that investors will monitor very closely.

“While the mid-term elections are generally not seen as a massive one for financial markets, the ongoing uncertain speculations that have surrounded the Trump Administration means that investors are at risk to being more reactive to this event,” he added.

At the close on Nov 2, the ringgit marked its first gain in six weeks, appreciating by 0.4 per cent to RM4.1587 against the US dollar, before declining to RM4.1730 at the close on Nov 5.