Good signs for Budget

> Stock market bullish, ringgit chalks first rise in six weeks

KUALA LUMPUR: Market players have shown revived confidence in the Budget, with positive reaction in both the stock market and ringgit.

The RM314.5 billion Budget is aimed at balancing fiscal discipline and growth, as well as to ensure the country’s development projects.

Malaysian Industrial Development Finance 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, Bernama reported.

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funds accumulated RM322.7 million net of local equities last week (Oct 29-Nov 2), offsetting the RM310.1 million net withdrawn in the preceding week (Oct 22-26).

However, Kenanga Research said the higher-than-expected budget deficit numbers of 3.7% for 2018 might keep foreign investors away from the local equity market in the short-term.

It 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%, due to the previous government’s spending commitments. However, the new government is determined to implement fiscal consolidation measures to reduce the deficit to 3.4% in 2019, 3.0 % in 2020 and 2.8 % in 2021.

FXTM Global Head of Currency Strategy and 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 mid-term elections, something that investors will monitor very closely.

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