Back to over 1,800 points, ‘1,900 beckons’

It had highest year-to-date return in region, say analysts

THE FBM KLCI closes above 1,800 points for the first time since May 23, driven by foreign funds buoyed by positive economic indicators and the new government making good on its reform agenda.

MALAYSIA’S stock market bourse has breached 1,800 points again after plunging to 1,660 mark after the 14th General Election (GE14), and looks set to test the 1,900 level in the coming months.

Analysts expected Bursa Malaysia’s key index to trend higher after having bucked the regional trend to have the highest total return year-to-date, topping major markets, such as Singapore, Thailand and Indonesia.

They said upcoming key events, such as the 2019 Budget announcement, the 11th Malaysia Plan mid-term review as well as the oncoming release of key economic key indicators, were expected to drive extra positive vibes into the market.

The stock market, lifted by investors’ confidence, breached 1,800 points level for the first time on Wednesday since May 24.

The key benchmark index, FTSE Bursa Malaysia KLCI, edged up 0.22 of-a-point, or 0.012 per cent to close at 1,804.95 from Wednesday’s close of 1,804.73.

The index had been on a recovery with the return of foreign funds, analysts said.

It had gained strength to trend upwards from its lows of 1,660 points level in June and July, brought about by the exodus of foreign funds to the tune of RM10 billion.

MIDF Research head Redza Rahman said foreign investors continued to ramp up investments into the local market because they were interested in the earnings season and began to be more confident about the new government’s commitment to its manifestos despite trade war fears.

“The passing of the Sales and Service Tax bills is a step in the right direction to show the government’s commitment to its manifesto. The slew of changes among key management posts of government-linked investment companies also indicate that the government is serious about improving the corporate governance and rule of law.”

The strong showing of key economic indicators, particularly the export figures, inflation data, as well as business and consumer confidence, which came out positive, had supported the rise of the index, he added.

“The inflows this week were registered at RM466.9 million as of Wednesday. So certainly, the sentiment is good.”

Moving forward, Redza said a few more indicators investors were waiting for, namely the distributive trade numbers, employment rate, and economic growth data to be released next week, might continue to support the uptrend.

“Good numbers are expected, so this will continue to provide the extra positive vibes into the market.”

Investors would keep close tabs on Malaysia’s 2019 Budget announcement and the 11th Malaysia Plan mid-term review, Redza added.

Malaysian Association of Technical Analysts adviser Nazarry Rosli said foreign investors had been buying back into Malaysia’s stock market, which indicated their confidence in the new government.

“We expect the market might be doing some ‘technical correction’ due to profit-taking activities in the short term and also due to the ‘overbought’ situation. Index, however, is expected to test the next resistance level of 1,850 points once it resumes the uptrend,” he said.

Nazarry said if the 2019 Budget could spur economic activities, it was possible that the key index would be testing the major psychological resistance level of 1,900 points.

However, the analysts warned that all bets could also be off as events such as United States midterm elections in November and the possible resumption of trade, which may re-exert volatility and uncertainty in the market.