WEEK AHEAD: WHAT’S IN STORE FOR MALAYSIAN MARKETS

KUALA LUMPUR – Buying momentum on Bursa Malaysia is expected to continue next week, in line with the global equities on lack of worries over trade war between the United States and China.

Hermana Capital Bhd Chief Executive Officer and Chief Investment Officer Datuk Dr Nazri Khan Adam Khan said the positive sentiment would restore investors risk appetite.

On the local front, he said the reduction of foreign fund outflow from the country would also support the market next week.

“For the past three months, the outflow was quite significant. The momentum, however, has slowed down on the back of steadier oil prices that helped push oil and gas and other related stocks,” he told Bernama.

Furthermore, Nazri Khan said prospects for inflow of foreign direct investment in the second half of the year would also support sentiment in the market.

He said with the new government being more transparent and efficient, coupled with the stable financial and banking ecosystem following the unchanged overnight policy rate (OPR) by the central bank, they would spur higher demand.

“I don’t see why they (foreign investors) should stay on the sideline anymore,” he added.

For the week just ended, the local bourse trended broadly higher, tracking regional peers, influenced by the trade war sentiment.

On a Friday-to-Friday basis, the benchmark FTSE Bursa Malaysia KLCI was 58.07 points firmer at 1,721.93 from 1,663.89 in the previous week.

The FBM Emas Index surged 347.22 points to 12,146.21 and the FBMT100 Index soared 352.79 points to 11,948.03.

The FBM 70 climbed 248.92 points to 14,783.6, the FBM Emas Shariah Index bagged 275.46 points to 12,238.76, and the FBM Ace advanced 117.16 points to 5,351.34.

On a sectoral basis, the Plantation Index was 91.16 points higher at 7,512.54 and the Industrial Index rose 91.94 points at 3,179.53.

The Finance Index jumped 693.48 points to 17,034.38, as investors reacted positively to Bank Negara Malaysia’s decision to keep the OPR unchanged at 3.25 per cent during its meeting on Wednesday.

Weekly turnover widened to 12.04 billion units valued at RM11.66 billion from 10.05 billion units worth RM8.36 billion previously. Main market volume expanded to 7.25 billion shares valued at RM10.37 billion from 5.99 billion shares worth RM7.01 billion.

Warrants turnover ballooned to 3.43 billion units valued at RM1 billion from 2.64 billion units worth RM817.89 million in the previous week.

The ACE market volume, however, reduced slightly to 1.35 billion shares valued at RM282.3 million from 1.40 billion shares worth RM290.52 million.

Forex:

KUALA LUMPUR – The ringgit is expected to strengthen to the 4.0 level next week on improved oil prices, said Hermana Capital Bhd Chief Executive Officer and Chief Investment Officer Datuk Dr Nazri Khan Adam Khan.

He said if oil price rise were to continue, not only the ringgit but also other currencies would get a boost, with oil being one of the country’s main sources of revenue.

Hong Leong Investment Bank Bhd (HLIB) also expects a slight bullish bias in the local note against the US dollar next week, anticipating easing of trade tensions to support continued recovery in risk appetite.

“Technically, USD-MYR continues to show upside fatigue after failure to break the 4.0515 level this week.

“As such, we maintain the view that a retracement to recent rally is still in the works, potentially sliding lower to 4.0047 going forward,” it said in a note.

HLIB said it suspected the US dollar might lose upside traction next week as trade tensions appeared to be easing, while a lack of major US data would unlikely catch sufficient attention to drive buying interest.

On a Friday-to-Friday basis, the local note finished lower against the greenback at 4.0500/0530 from 4.0380/0420.

The ringgit was traded higher against a basket of major currencies.

It appreciated against the Singapore dollar to 2.9620/9651 versus 2.9672/9712 last Friday and rose against the yen to 3.6006/6043 from 3.6497/6536.

The ringgit improved against the pound to 5.3189/3236 from 5.3419/3476 and advanced against the euro to 4.7122/7161 from 4.7277/7340 –

Palm Oil:

KUALA LUMPUR The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade in yo-yo mode after inventory data revealed that the CPO stock rose 4.38 per cent to 1.22 million tonnes.

Interband Group of Companies Senior Trader Jim Teh said however, the on-going trade war between the US and China could possibly lend support to CPO as China would seek an alternative to soybean oil.

“Should we expect a higher export to China because of this reason… and the slight weakening of the ringgit may boost exports to China, the Middle East and Pakistan,” he told Bernama.

This will help reduce the stock level, he said, adding that the CPO price was expected to trade between RM2,100 and RM2,200 per tonne next week.

Palm oil is the closest edible oil substitute to soybean oil.

The market was traded mixed for the week just ended.  On a Friday-to-Friday basis, July 2018 fell RM115 to RM2,140 per tonne, August 2018 eased RM140 to RM2,124 per tonne, September 2018 declined RM119 to RM2,147, and October 2018 slipped RM111 to RM2,159.

Weekly turnover increased to 244,123 lots from last Friday’s 166,306 lots, while open interest was higher at 306,036 contracts compared with 284,975 contracts.

On the physical market, July South stood at RM2,180 per tonne.

Rubber:

KUALA LUMPUR  Malaysian rubber market is expected to rebound next week as inventory data revealed that rubber production is declining on year-on-year basis amidst increasing demand for the commodity.

For the week just ended, the Department of Statistics reported that Malaysia’s natural rubber (NR) production decreased 18.6 per cent year-on-year.

However, Malaysia’s NR production rose 0.2 per cent to 35,789 tonnes in May 2018 from 35,726 tonnes in April.

“The local rubber market would also continue to track the rubber futures movement on the benchmark Tokyo Commodity Exchange and crude oil performance next week,” he said.

The dealer said that the regional rubber futures markets were on the downtrend for the whole week.

On a Friday-to-Friday basis, the Malaysian Rubber Board’s sellers official physical price for tyre-grade SMR 20 added four sen to 521.5 sen per kg, while latex-in-bulk lost 2.5 sen to 408.5 sen per kg.

The unofficial sellers’ closing price for tyre-grade SMR 20 slipped one sen to 523 sen per kg and latex-in-bulk unchanged at 412 sen per kg.

– Bernama

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