KUALA LUMPUR: Bursa Malaysia will be among the emerging market beneficiaries if the US Federal Reserve (Fed) lowers interest rates by at least once more by end-2019, according to Standard Chartered Bank Malaysia Bhd.
Managed Investments and Products Management head Danny Chang said market players were expecting a nearly a 100% chance of one Fed rate cut, and a 93% probability of two, by end-2019.
“Historically, when there is a US Fed rate cut which will not lead to a recession in the country, which is what we expect, it will be good for emerging equity markets, including Bursa Malaysia,” he told reporters on the sidelines of the Standard Chartered’s Global Market Outlook for the Second Half of 2019 briefing here today.
However, Chang admitted that Northeast Asian emerging markets such as Hong Kong, China and South Korea would benefit first, subsequently followed by Bursa Malaysia due to the local bourse‘s higher valuation and the low beta nature.
He added that the lower corporate earnings in Malaysia, which grew less than 10% as compared with 11-12% registered by Northeast Asian markets thus far also made the local exchange less attractive.
“It is not the government’s policies or political risks that affect the Bursa Malaysia, but (because) the local equity market is still expensive compared with others,” he said, adding that the benchmark FTSE Bursa Malaysia KLCI’s (FBM KLCI) price-to-earnings (P/E) ratio currently stood at about 16-17 times, much higher than the 10-11 times P/E ratio of Northeast Asian markets.
On the Overnight Policy Rate (OPR) adjustment, Chang said Standard Chartered expects Bank Negara Malaysia to maintain the rate at the current level of 3% at year-end.
“The economy is not slowing to a level where the central bank has to do another immediate rate cut after 25 basis points cut in May this year,” said Chang.
However, he said the central bank could cut the rate of the OPR if it wanted to mainly due to the low inflation rate in the country.
On the ringgit’s performance, Standard Chartered projected the local unit to trade at 4.15 level against the US dollar by year-end despite expectations of the weakening of the greenback following the Fed rate cuts.
Chang said the weaker forecast was due to the anticipation of lower foreign inflows as compared with the Northeast Asian markets.
“The saga of Malaysian bonds to be removed from the FTSE World Government Bond Index (WGBI) in April this year had also caused some restrictions in foreign inflows,” he added.
On the global front, the bank said it continues to have a preference for equities over bonds, and emerging market and corporate bonds over developed market government bonds.
“Within equities, we have a tilt towards the US,” it said in a statement today.
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KUALA LUMPUR: Shares on Bursa Malaysia opened lower today, extending its string of consecutive losses, with no signs of a recovery on the FBM KLCI as yet.
The downside bias is likely to continue over the near term.
At 9.06am, the FTSE Bursa Malaysia KLCI (FBM KLCI) slipped 2.21 points to 1,666.73 after losing 3.43 points to 1,668.94 at yesterday’s close.
It opened 1.44 points easier at 1,667.50 earlier today.
Market breadth was negative with 150 decliners trounced 79 winners, while 178 counters unchanged, 1,449 untraded and 21 others suspended.
Turnover stood at 326.56 million units worth RM94.63 million.
Malacca Securities Sdn Bhd said the key index is still consolidating after making strong gains over the May-June period that has pushed it into the overbought territory.
However, the research house said also, markets are also anticipating several new leads, both domestically and overseas, which would spur fresh buying but this could again leave the key index to drift lower.
“In addition, there are renewed concerns over the direction of global equities after they soared over 16 per cent year-to-date which have left valuations on the toppish side.”
With the consolidation likely to continue over the near term, the FBM KLCI’s supports are pegged at the 1,665 level, followed by the 1,660 level while the resistances are at 1,676 and 1,680 levels.
TNB topped losers in the heavyweights, shrinking 10 sen to RM13.68, IHH lost three sen to RM5.77, Press Metal reduced six sen to RM4.33 and Petronas Chemicals and Genting Malaysia were two sen easier at RM8.22 and RM3.37, respectively.
Of the losers, HSS Engineers and Hong Leong Financial were six sen easier at RM1.13 and RM18.62, respectively, Pos Malaysia slid five sen to RM1.76 while Teck Guan, Vitrox and MCE were all reduced four sen to RM1.09, RM6.85 and 65 sen, respectively.
The FBM Emas Index fell 15.48 points to 11,841.80 and the FBMT 100 Index down 15.23 points to 11,665.26.
The FBM Emas Shariah Index was 25.21 points easier at 12,233.48, the FBM 70 declined 18.52 points to 14,932.16 and the FBM Ace decreased 11.50 points to 4,689.23.
Sector-wise, the Financial Services Index perked 6.02 points to 16,621.24, the Plantation Index advanced 1.50 points to 6,887.15. but the Industrial Products & Services Index down 0.34 of-a-point to 159.87. – Bernama
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PETALING JAYA: Foreign investors were net buyers on Bursa Malaysia for the fourth consecutive week albeit at a slower pace, acquiring RM84.9 million net of local equities last week, according to MIDF Research.
The week started slow as offshore funds snapped up RM15.8 million net of local equities on Monday.
“Sentiment on Monday was moderated by increasing uncertainty over the outcome of the upcoming Federal Reserve policy meeting as latest U.S payroll report signalled that the American economy remains on track,” the research house said.
However, the following day saw a spike of foreign buying which reached RM104.6 million net, the highest during the week, coinciding with Bank Negara Malaysia’s (BNM) decision to keep the benchmark interest rate unchanged.
“The level of foreign net inflows tapered by more than half on Wednesday and Thursday to RM42.5 million and RM51.2 million as international funds moved to the sidelines, awaiting clues about interest rate direction from Federal Reserve chairman Jerome Powell’s congressional testimony.”
Meanwhile, Friday saw the end to four-day buying streak as foreign funds offloaded RM129.3 million net.
“Much of the selling activity was spurred by the potential earnings dilution of CIMB Group Holdings Bhd following the proposed issuance of exchangeable bonds by Khazanah Nasional.”
Last week’s foreign net inflow brings the year to date foreign net outflow from Malaysia to RM4.35 billion.
In contrast, the other six Asian markets (Korea, Thailand, Indonesia, India, Taiwan and the Philippines) monitored by MIDF have seen a foreign net inflow so far for the year.
The research house said strong participation was only seen amongst foreign investors which recorded a 10.6% increase in average daily traded value (ADTV) to RM985.9 million, nearing the healthy level of RM1 billion.