Market little changed CNY week
REVIEW: Bursa Malaysia came into the Chinese New Year week relatively unchanged over the previous weeks as the seasonally quiet period, coupled with uncertainty in the external front, had the market trading in range.
The local market had been picking up foreign interest in the lead up to the US-China trade talks that ended last Thursday. In its weekly fund flow report, MIDF Research noted that Bursa Malaysia saw a net inflow of RM146.8mil over the previous holiday-shortened week, its fourth weekly gain in a row.
However, with the advent of Chinese New Year and another stage of the trade talks to take place in February, the market remained firmly in consolidation mode with little catalyst to move things in either direction.
Bursa Malaysia rallied on Monday as investors quickly ratcheted up prices in the final day of trading before the Chinese New Year break. The momentum fizzled in the final stretch of trading as investors exited their positions and cashed in on the intraday gains.
The FBM KLCI ended Monday just 0.08 points higher at 1,683.61 after having surged as much as 16 points in early trade.
Over the week, trading in Asia was uneventful as the key market mover in the region, China, was shut for the Chinese New Year holidays. Other markets such as Hong Kong and South Korea were also closed for parts of the week, leading to a lack of trading action, although Japan and Australia remained open for business.
US markets pushed higher while Asia slumbered with some positive sentiment returning to equities.
The optimistic turn was helped along by the US Federal Reserve reiterating its dovish policy direction and the announcement of a series of positive corporate earnings. The week was punctuated by US President Donald Trump’s State of the Union address, which took place late on Tuesday.
At the start of the week, the US Federal Reserve signalled an end to its tightening measures due to a cloudy outlook to the US economy. However, the Fed maintained that its future direction will depend on “incoming economic information”.
Meanwhile, positive earnings continued to come onto Wall Street. The market extended on the previous Friday’s performance as technology and industrial counters gave the major indices yet another boost for the week with the tech-heavy Nasdaq making the biggest jump of 1.2%.
The rally in US markets continued on Tuesday as yet more corporate earnings trickled in. Investors also held their breath for Trumps’ speech to Congress scheduled for the late evening. The major indices closed between 0.5% and 0.7% higher.
Trump’s comments, when delivered, gave little in the way of fresh trading catalysts. US indices took a short step backwards at its next session on Wednesday as investors feared yet another government shutdown in the wake of the President’s comments.
Upon Bursa Malaysia’s re-opening on Thursday, a flurry of buying took place as the market played catch up to the US rally and took in news of Washington’s next planned meeting with Beijing next week.
At market close, the FBM KLCI rose 9.78 points to 1,693.39.
On Friday, the trade talks once again come into question as Trump said he would not be meeting his Chinese counterpart before the March 1 deadline for another round of tariff hikes. Coupled with a deep cut in eurozone growth forecasts by the European Commission, sentiment turned grim overnight with the Dow Jones shaving off over 200 points or nearly 1%.
The FBM KLCI ended 6.87 points lower at 1,686.52.
Statistics: The major index ended the week 2.99 points or 0.2% higher at 1,686.52. Total turnover for the three-day trading week stood at 4.95 billion shares amounting to RM3.41bil compared with 8.77 billion shares worth RM8.13bil over the previous four-day week.
Outlook: Little change was seen in the FBM KLCI over the course of the three-day week with little certainty or decisive resolution coming into play. As the March 1 deadline for the trade tariffs increase looms near, investors will tuned in to any sign of resolution or lack thereof, in deciding the economic outlook for the year.
That the FBM KLCI has managed to stay above the 50-day simple moving average is a sign of hopefulness although a breakout of the current trading channel would take some hard commitment from policymakers.
There will be more hints as to the state of the Chinese economy when it opens for business next week with economic and trade data for January to be announced.
The three-week deadline for US lawmakers to come to a spending budget deal passes on Feb 15, after which the US government will enter a second shutdown unless an agreement is made.
Meanwhile, the local benchmark index is expected to remain range-bound over the coming week within the trading limits of 1,709 and 1,680.