Market sentiment turns positive
US-China trade war truce and oil uptrend push FBM KLCI higher
PETALING JAYA: Starting December on a strong note, shares on Bursa Malaysia rallied yesterday as sentiment turned positive on regional markets after the US and China agreed on a trade war truce.
Gains in global oil prices also added to the bullish tone in the local equity market.
The benchmark FBM KLCI ended 19.86 points or 1.18% higher at 1,699.72, off an intra-day high of 1,700.67 points.
On the broader market, gainers outnumbered losers 568 to 338, while 327 counters were unchanged after a trading day that saw 2.52 billion shares worth RM2.3bil change hands.
A stockbroker told StarBiz that the local equity market, which was tracking strong regional gains yesterday, benefited from the effects of a “temporary truce” between the US and China on trade-related issues after a G20 meeting between the two largest economies in the world over the weekend.
“The easing of trade tensions between the two biggest economies in the world certainly has a positive effect on the local equity market, which has been performing quite poorly in recent weeks, and what further supported the rebound in our market was the rise in global oil prices,” he said.
“However, we see these as merely a temporary reprieve and most gains will remain capped by the cautious underlying sentiment of investors,” he added.
Over the weekend, US President Donald Trump and China President Xi Jinping agreed in principle to keep the trade war from escalating and pledged to halt the imposition of new tariffs for 90 days.
Separately, oil prices rallied after a decision by Canada’s largest oil-producing province, Alberta, to limit production by 325,000 barrels a day. The oil rally was also supported by an agreement between Saudi Arabia and Russia to extend their pact to manage the oil market, raising speculation of further production cut ahead of a meeting this week by the Organisation of the Petroleum Exporting Countries.
The Brent crude oil futures were up 4.9% to US$62.36 per barrel as at 4.20pm yesterday, while the US West Texas Intermediate (WTI) crude oil gained 5.1% to US$53.54 per barrel.
Meanwhile all regional markets yesterday closed in the positive territory, with Japan’s Nikkei 225, rising 1% to 22,574.76; Hong Kong’s Hang Seng, up 2.6% to 27,182.04; China’s Shanghai Composite Index, up 2.6% to 2,654.8; South Korea’s Kospi, up 1.7% to 2,131.93; and Singapore’s Straits Times Index, up 2.3% to 3,189.09.
Rabobank senior strategist for Asia Pacific, Michael Every, in a note cautioned that investors could misperceive the implications of the temporary trade truce between the US and China.
“Markets may well react with a relief ‘risk on’ shift today, but underlying US-China differences remain unresolved,” the economist of the Dutch banking and financial services company said.
“In a nut-shell, all we have is a pause until March 2, 2019 in this trade war, and China’s position is weakening while that of the US is strengthening... we are now guaranteed a nice December; but fear the Ides of March,” he said.
Locally, leading the stock market gains yesterday were key blue chips, namely Axiata Group Bhd, Sime Darby Bhd, Sime Darby Plantation Bhd, Telekom Malaysia Bhd and Genting Bhd.
Also gaining ground were several oil and gas counters such as Bumi Armada Bhd, Hibiscus Petroleum Bhd and Dialog Group Bhd.
An analyst with a local bank noted the easing of pressure on the local stock market could see the return of some foreign buying this week.
“This will be supported by a signal from the US Federal Reserve that the pace of US interest rate increases might slow,” he said.
The Malaysian stock market had registered its fourth consecutive week of foreign selling. Citing data from Bursa Malaysia, MIDF Research noted that foreign funds sold RM244.5mil net of local equities last week, the highest in five weeks, and nearly five times the amount withdrawn in the preceding week.
“The month of November recorded a total foreign net outflow of RM718.9mil, almost half of the RM1.42bil offloaded in October. This brings the year-to-date foreign outflow to RM10.67bil, or-US$2.64bil,” MIDF Research said in its report.