Bursa gets an OPR push
REVIEW: The ringgit, whose growing strength has helped improve sentiment in the local equities market, captured investor attention over the course of the last trading week.
Policy developments, both domestic and abroad, served to bolster its strength over recent days and lent to forecasts over how this would reflect on corporate earnings moving forward.
On the exernal front, the three-day US government shutdown and President Donald Trump’s Monday announcement of import tariffs on solar panels and washing machines served to hurt investor confidence and weaken the dollar against global currencies.
Back home, Bank Negara on Thursday confirmed a 25bps hike to the overnight policy rate, which aided in the progress of both the ringgit and financial counters that are expected to capitalise on higher interest margins. The onward march of the ringgit, which strengthened to 3.87 against the greenback by end-week, and the flow of investment from foreign investors to Malaysia and other emerging markets continued to push the local market higher.
Oil prices also saw a marked rise from the midweek, no doubt aided along by its inverse relationship to the US dollar. Brent crude sat firmly above US$70 a barrel on Wednesday and progressed past US$71 on Thursday. WTI crude mirrored the gains, rising above US$65.
These positives kept the bullish environment for Bursa Malaysia, although trading volumes were seen drying up in comparison to the high levels seen over previous weeks, suggesting that the buying interest had tapered. At the week’s open, while markets in Asia showed some uncertainty over the fate of the US shutdown, Bursa seemed to receive a shot in the arm from the prospect of the monetary policy meeting later in the week. The benchmark index rose over four points to 1,833.15 points.
On Tuesday, it was more news Stateside on rising protectionism via import tariffs that had investors jittery over the dollar. While Malaysia, being one of the world’s leading manufacturers of solar panels, had reason to bemoan the new taxes, the local currency gained from the slipping greenback.
Asian markets were also in a more jubilant mood given the end of the US shutdown and optimism over corporate earnings. Reports of the lion’s share of US companies beating estimates lent evidence to a stellar quarter.
The local bourse took all this in and saw only one way to go – up. At market close, the FBM KLCI rose 4.89 points to 1,838.04.
At midweek, Asian markets proceeded to scale record peaks in the early session even as the dollar continued to weigh. However, profit-taking settled in from the unabated rise in equity prices and regional markets slumped back by the end of the day’s session. The local market moved in tandem, slipping back by a point to 1,837.04
Overnight, there was a fresh sign that the Trump administration was pushing ahead with its “America First” protectionist agenda as US Treasury Secretary Steven Mnuchin spoke in favour of a weaker dollar as beneficial to trade.
The comment added to pressure on the greenback, and pushed the ringgit to still firmer footing ahead of Bank Negara’s interest rate hike on Thursday.
Bank stocks rallied in the lead up to the central bank’s 3pm announcement, as analysts predicted boosts to earnings margins following the policy change.
KLCI financial heavyweights Maybank, Public Bank and CIMB surged following the announcement, giving a cumulative 4.7 point lift to the index. In total, the FBM KLCI rose 8.8 points to 1.845. 86 points.
On Friday, the market once again recovered from profit-taking in the early session to rise 8.06 points and slip past the 1,850 key level. Bank stocks continued to lead the way on high investor hopes for improved earnings.
Statistics: On a weekly basis, the major index was up 25.09 points or 1.4% to 1,853.92 yesterday, versus 1,828.83 on Jan 19. Total turnover for the trading week stood at 16.62 billion shares amounting to RM13.3bil, compared with 25.32 billion shares valued at RM15.97bil exchanging hands the previous week.
Outlook: The FBM KLCI held up against profit-taking as buying interest from foreign investors continued in emerging markets such as Malaysia. The index inched up higher on the daily price chart, and although the ascent was not as steep as what was seen from Dec 5 to Jan 9, there was reaffirmation of an uptrend.
The index had displayed symptoms of consolidation but an upswing in the technical indicators from the gains over the past week suggest momentum is on the rise even if overbought.
At present, the market looks set to edge higher as long as the local market continues to hold the imagination of foreign investors. Sustaining its momentum, it faces its next resistance at 1,867 while it is buoyed by an immediate support of 1,840 points.
A reversal of fortunes for the dollar or commodity prices, though, could quickly switch up the scenario.
The ringgit’s push against the greenback has taken it to April 2016 levels, The technical indicators show overbought conditions although they remain healthy with a push towards immediate resistance at 3.85.