Bursa investors remain cautious
REVIEW: An interest rate hike in the US and rising oil prices lent some concern over future global growth even as China showed its mettle against the US trade tariffs.
With the push-and-pull factors of the external environment causing paralysis, much attention was put on Axiata and news of a potential offer for its M1 unit.
Coming out of the weekend, China’s markets, along with Japan’s and South Korea’s were closed for Autumn national holidays. However, China’s officials sent a strong message of resistance against US President Donald Trump’s attempt at ratcheting up the pressure on Beijing by refusing an invitation to trade talks with the White House.
Relying instead on stimulus measures to boost domestic demand, the Chinese government has crafted out a defensive strategy, which, at the very least, has eased investor concerns its economy will be derailed by export weakness.
In the home market, investors on Bursa Malaysia continued to show caution with immediate price action keeping the index near the 1,800-point line.
While the bulls had returned to Asian markets in the previous week, investors were quick to take profit on news that Beijing would not be capitulating to further negotiations.
The FBM KLCI’s 10.47-point decline to 1,800.17 on Monday was a precautionary measure as the key markets on holiday left investors with few leads.
Meanwhile, oil markets were seeing price movement following Trump’s call for the Middle East to reduce prices ahead of a meeting between members of Opec and other major oil producers. But Sunday’s meeting yielded a rebuff from the oil producers, who decided that prices would not be cut.
With Brent crude futures already previously reaching the US$80 a barrel mark, the news sent the oil benchmark on a surge towards US$81.50 a barrel.
Currencies were also in the spotlight given the US Federal Reserve’s two-day monetary policy meeting ending on Wednesday.
At Tuesday’s open, Chinese markets started its week and slipped 0.5%.
On the local stock exchange, Axiata fell sharply as it was reportedly not involved in negotiations for a potential acquisition of M1 by Keppel Corp and Singapore Press Holdings (SPH). The FBM KLCI closed 5.7 points lower at 1,794.47.
At midweek, China pulled the region higher as the MSCI said it was considering increasing the weighting of the country’s stocks on its global index. Simultaneously, investors considered Beijing’s stimulus measures and whether they were sufficient to help the economy weather the US trade tariffs.
Key regional indices were jubilant – the Shanghai Composite Index was up 0.9%, the CSI 300 rose 1.11% and Hong Kong’s Hang Seng gained 1.15%. Earlier in the day, Japan’s Nikkei closed 0.4% higher while South Korea’s Kospi added 0.68%.
On Bursa Malaysia, Axiata saw an about turn in share price as SPH and Keppel made a pre-conditional voluntary general offer of S$2.06 for the shares in M1 they did not own. The stock jumped 19 sen to RM4.75, leading the index 3.4 points higher to 1,798.72.
Asian markets opened on Thursday to the news that US Fed had hiked interest rates for a third time, with another expected for December. The central bank also dropped phrasing describing its policy as “accomodative”, causing some anxiety over its ramifications. Global markets expectedly stalled.
Later that day, Axiata issued a media statement on the M1 issue, leading to a further decline in its share price.
The FBM KLCI was little changed that day, slipping just 0.08 points to 1798.64.
Yesterday, while Asian markets tracked Wall Street higher on strong economic data – the Nikkei touched a 27-year high – the FBM KLCI weighed. The ringgit rose slightly against global currencies on rising oil prices but stayed little changed against the greenback. At 5pm, the index closed 5.49 points lower at 1,793.15.
Statistics: Week-on-week, the major index was down 17.49 points or 1% to 1,793.15. Total turnover for the week stood at 9.82 billion shares amounting to RM10.1bil compared with 7.8 billion shares worth RM9.5bil over the last four-day trading week.
Outlook: The local market remains uncommitted as was evidenced by the retreat on Monday following the previous week’s rally. While oil prices have spiked with more gains expected over the horizon, the ringgit has held relatively stable against the US dollar given the strength of the US economy.
The local market’s negative performance over the week can be partly attributed to fears that monetary tighting by the US Fed will trigger greater outflows from emerging markets.
With Chinese markets shutting down until the following Monday, a relatively quiet trading week ahead is expected.
The FBM KLCI daily price chart continues to be range-bound with investors finding comfort near the 1,800 mark. The technical outlook is improving albeit weak.
The slow-stochastic suggests a pick up over the immediate term as it rose to 35 points while the key simple moving averages (SMA) indicate a gradual unwinding of the bear market as the 50-day SMA crossed above the 100-day SMA at the previous Friday’s close and now looks headed for the 200-day SMA.
For the time being, the resistance and support levels of 1,825 and 1,775 remain intact.