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External uncertainties to weigh on Bursa Malaysia next week

KUALA LUMPUR: Bursa Malaysia will likely trend lower next week amidst uncertainty over the outcome of the United States-China trade talks.

Phillip Capital Management senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was now ripe for a pullback towards a lower support level range of 1,700-1,710 points.

“Investors have their fear levels heightened with the March 1 deadline nearing, as it could potentially lead to the United States increasing tariffs on US$200 billion worth of Chinese products, which could be avoided if the two economic powerhouses of the world reach a consensus.

“However, a stronger ringgit, rising commodity prices and a positive outcome from the China-Malaysia negotiation on the East Coast Rail Link (ECRL) should cap any temporary weakness in the local equities market,” he told Bernama.

Nazri Khan said strong economic cooperation between Malaysia and China had resulted in both countries resuming talks on the ECRL project to reach a win-win outcome, and a positive conclusion would boost the infrastructure sector as a direct result of growing confidence of local and foreign investors.

From a technical perspective, he said, the FBM KLCI chart showed an encouraging momentum, with the bullish bias remaining strong above the 1,700-level and the immediate strong resistance being at 1,750 points.

During the week, the FBM KLCI recorded a bullish pattern in line with regional equities and breached the 1,700 level on Tuesday as investors were optimistic that the latest round of trade talks between China and the United States would lead to a deal to resolve their tariff war.

The FBM KLCI last rose above the 1,700 level on Nov 26 last year, when it hit 1,701.99.

On a Friday-to-Friday basis, the benchmark FBM KLCI settled 32.59 points higher at 1,721.42.

The FBM Emas Index was 252.23 points higher at 12,002.50, the FBMT 100 Index increased 245.98 points to 11,858.88 and the FBM Emas Shariah Index jumped 289.51 points to 11,953.11.

The FBM 70 surged 387.27 points to 14,415.46 and the FBM Ace Index rose 68.89 points to 4,715.48.

Sector-wise, the Financial Services Index gained 208.16 points to 17,840.72, the Plantation Index increased 77.67 points to 7,413.10 and the Industrial Products and Services Index inched up 4.90 points to 168.03.

Weekly turnover rose to 15.75 billion units worth RM12.61 billion from 14.85 billion units valued at RM9.78 billion.

Main Market volume declined to 10.84 billion shares valued at RM11.56 billion from 11.05 billion shares valued at RM8.99 billion.

Warrants turnover increased to 3.10 billion units worth RM683.63 million from 2.27 billion units worth RM480.02 million.

The ACE Market volume improved to 1.80 billion shares valued at RM366.49 million from 1.52 billion shares valued at RM305.71 million.

The gold futures contract on Bursa Malaysia Derivatives is likely to extend its downtrend next week, pressured by the optimism over the US-China trade talks.

Phillip Futures Sdn Bhd dealer Chang Hui Ying said demand for gold was expected to remain subdued as the precious metal was largely used as a safe-haven asset amid political uncertainty.

“Besides, the gold price is also anticipated to be weighed by the US Federal Open Market Committee’s (FOMC) Jan 30-31 meeting minutes released on Thursday,“ she told Bernama.

Chang said the FOMC minutes, which showed that the US economy remaining strong, were also likely to continue prompting investors to dump safe-haven assets like gold and opt for riskier assets.

She added that the local gold futures were also likely to be influenced by the benchmark New York Commodity Exchange (Comex) gold futures’ performance next week.

For the week just ended, the local gold futures were traded higher in the first three days but succumbed thereafter to finish the week lower, mainly hampered by the hawkish FOMC minutes and positive trade talks progress.

On a Friday-to-Friday basis, spot month February 2019 and March 2019 added 28 ticks to RM173.60 per gramme, respectively, while April 2019 and May 2019 were each 23 ticks higher at RM173.65 and RM173.75 per gramme, respectively.

Weekly turnover narrowed to three lots worth RM52,330 from four lots valued at RM68,820 in the previous week, while open interest widened to 23 contracts from 22 contracts previously.— Bernama


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Gold prices rise on trade talk optimism; Fed stance limits gains

Gold prices edged higher on Friday as optimism over U.S.-China trade talks pressured the dollar, but signs of the U.S. Federal Reserve raising interest rates again this year capped gains.

Spot gold inched 0.1 percent higher to $1,324.59 per ounce at 0408 GMT. The metal was headed for a second straight weekly rise, up almost 0.3 percent. The precious metal had hit a 10-month high on Thursday, but later erased the gains.

U.S. gold futures were subdued at $1,327.7 per ounce.

“On a day-to-day basis, gold is a function of changing currency markets and the U.S. dollar. Medium outlook is a lot more to do with geopolitical issues and yields,” said Kyle Rodda, a market analyst with IG Markets.

The dollar index against a basket of six major currencies was set to decline about 0.3 percent this week, which could be its biggest weekly fall in a month..

“The fact that gold was overbought-driven very much by a new yield environment and tensions around the world has helped keep gold prices elevated,” Rodda said.

Gold had hit a 10-month high of $1,346.73 on Wednesday, but minutes from the Fed’s January policy meeting indicated there might in fact be a rate hike this year, erasing gains in gold.

“Dovish signals from U.S. Federal Open Market Committee officials for the shorter term have kept global equities steady whilst applying bearish pressures on the non-interest bearing asset,” Phillip Futures said in a note.

Higher interest rates reduce investor interest in non-yielding bullion.

Markets were looking for further indications of progress on trade talks with U.S. and Chinese negotiators resuming high-level talks on Thursday to hash out a deal that could end their trade war, just over a week before a U.S.-imposed deadline.

The United States and China have started to outline commitments in principle on the stickiest issues in their trade dispute, marking the most significant progress yet toward ending a seven-month trade war, according to sources familiar with the negotiations, Reuters reported exclusively.

Indicative of investor sentiment toward bullion, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.63 percent to 789.51 tonnes on Thursday.

Meanwhile, palladium was up 0.3 percent to $1,473.00 per ounce, having surpassed the key $1,500 level for the first time on Feb. 20.

The autocatalyst metal was on track for a third straight week of gains, up nearly 3 percent. Platinum gained 0.6 percent to $824, and was set for its best week since early January.

Silver was little changed at $15.81 per ounce. It was on course to snap two consecutive weekly losses.


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Corporate earnings unlikely to excite stock market: Affin Hwang AM

KUALA LUMPUR: Corporate earnings delivery will not significantly influence the Malaysian capital market this year as catalysts are expected to come from the external front, according to Affin Hwang Asset Management Bhd (Affin Hwang AM).

Its managing director, Teng Chee Wai, said for 2019, the company expects a single-digit upside in the FBM KLCI at around 8% to 10%, partly buoyed by recovery in global growth as the economic cycle matures.

“2019 is a year that the markets are going to respond more towards macro policies rather than earnings. And I do not see price-earnings expansion to be one big factor this year for the market because there is a very little growth,” he told a press conference after presenting Affin Hwang AM market outlook and company briefing here today.

“With 5% in (consensus) earnings (estimates) growth, I don’t expect this year to be a double-digit year (for the FBM KLCI),” he said, noting downward revisions in earnings are likely if there is slowdown in global economic activities.

Asked whether 2019 is a good year to invest in stocks, Teng warned of risks and uncertainties in the market such as the ongoing trade dispute between the United States and China.

“There is no such thing as the best time to invest … you must be mindful of the risks, and asset allocation is the way forward,” he added.

Nevertheless, Teng said given the positive development in the US-China trade talks, coupled with changes in policy by the Federal Reserve, he is fairly confident that the market will improve at some point in the second half of the year.

On Affin Hwang AM’s outlook, Teng said the fund manager is confident that it will surpass the RM50 billion mark in assets under administration (AUA) this year and reach the RM52 billion level.

He said the firm’s AUA grew 0.84% or RM400 million to RM47.8 billion as at end of 2018 from RM47.4 billion in late 2017.

Earlier at the press conference, Affin Hwang AM’s Islamic entity, Aiiman Asset Management Sdn Bhd, launched its maiden fund called Aiiman Asia Pacific (ex-Japan) Dividend Fund, which marks its foray into the retail market.

Aiiman managing director Akmal Hassan said the fund is suitable for retail investors who want regular income distribution and capital gains, and have a medium- to long-term investment horizon and moderate risk tolerance.

The fund will invest a minimum of 70% of the fund’s net asset value (NAV) in syariah-compliant equities and a maximum of 30% of its NAV in sukuk, syariah-compliant money market instruments and/or deposits.

The base currency of the fund is in ringgit with a minimum investment amount of RM1,000.


Asian markets mixed after Fed minutes, eyes on trade talks (Updated)

HONG KONG: Asian markets mostly rose Thursday on growing optimism that China and the US will finally resolve their long-running trade war, with a report saying the two sides were working on an outline for a deal.

Equities have enjoyed a stellar start to the year on hopes for the negotiations and expectations the Federal Reserve will ease up on its pace of monetary tightening as growth at home and globally slows.

The upbeat mood across the region was enhanced Thursday as Bloomberg News said negotiators were sketching out a number of memorandums of understanding on key issues including intellectual property and technology transfer.

Without naming sources, the report said no final agreement was expected in Washington this week but that China’s top negotiator Liu He would meet Donald Trump Friday.

After a cautious start, markets were up across Asia Thursday.

Hong Kong rose 0.3% but Shanghai dipped 0.3% after fluctuating through the day. The yuan was sitting around its strongest level against the dollar since July, with support also coming from other reports that the US is calling in China not to weaken it to offset the impact of tariffs.

Tokyo ended up 0.2%, while Sydney rose 0.7%, Wellington added 0.6 percent and Taipei 0.5%.

There were also gains in Mumbai, Bangkok and Jakarta, while Singapore was flat though Seoul and Manila dipped.

While there has been no concrete sign of progress, Trump has insisted the talks are going “very well” and has indicated he could push back a deadline for a deal to be done.

‘Potentially ugly correction’

However, observers warned of turmoil if expectations were not met.

“There’s a lot of optimism baked into global markets on the outcome of the negotiations and precisely zero detail on the actual result,” said Jeffrey Halley, senior market analyst at OANDA.

“A suboptimal outcome could make for a potentially ugly correction in equities and currencies in particular.”

On Wednesday, minutes from the Fed’s latest policy meeting showed its board was concerned about the global outlook and trade tensions, and said US growth would “step down” from last year’s rapid pace.

It also said it expects to continue to wind down its balance sheet of securities and other assets – which helps keep borrowing costs down – but added “it was not yet clear” what rate moves “may be appropriate later this year”.

The minutes showed there could be another hike if price pressures pick up.

Analysts said there was still a possibility of more increases in borrowing costs this year, after four in 2018.

“The debate is still focused on whether to tighten or not, and not whether to cut,” said Lou Crandall, chief economist at Wrightson ICAP LLC. “The risk is tilted in the direction of more tightening.”

On currency markets, the pound extended Wednesday’s losses that came after Fitch warned it could slash Britain’s credit rating owing to the economic hit from a potential no-deal Brexit.

Adding to sterling’s weakness was Prime Minister Theresa May’s failure to get a breakthrough in talks with European Commission President Jean-Claude Juncker on revising their Brexit deal.

With just over a month until Britain leaves the bloc, May still has no agreement that she can push through parliament.

Adding to her woes was news that three MPs had quit her ruling Conservative party.— AFP


Asian markets mixed after Fed minutes, eyes on trade talks

HONG KONG: Asian markets were mixed Thursday after the Federal Reserve left open the possibility it could lift interest rates this year, while investors kept an optimistic eye on China-US trade talks.

Equities and other risk assets have enjoyed a stellar start to the year on hopes for the negotiations as well as expectations the US central bank will slow its pace of monetary tightening – with some even tipping a cut – as growth both at home and globally slows.

On Wednesday, the Fed minutes showed its policy board was concerned about the outlook and trade tensions, and said US growth would “step down” from last year’s rapid pace.

It also said it expects to continue to wind down its balance sheet of securities and other assets – which helps keep borrowing costs down – but added “it was not yet clear” what rate moves “may be appropriate later this year”.

The minutes showed that there could be another hike if price pressures pick up.

Analysts said there was still a possibility of more increases in borrowing costs this year, after four in 2018.

“The debate is still focused on whether to tighten or not, and not whether to cut,“ said Lou Crandall, chief economist at Wrightson ICAP LLC. “The risk is tilted in the direction of more tightening.”

In morning trade, Hong Kong was flat and Shanghai dipped 0.1% while Tokyo went into the break 0.1% lower.

Sydney rose 0.4%, Singapore slipped 0.2% and Seoul was off 0.3%. Wellington added 0.7%, Taipei was barely moved and Manila lost 0.5 percent.

‘Potentially ugly correction’

Focus is mainly on Washington where high-level diplomats from the world’s top two economies are looking to hammer out an agreement to resolve their nearly year-long trade row.

While there has been very little sign of progress, US President Donald Trump has insisted the talks are going “very well” and has indicated he could push back a deadline for a deal to be done, while investors remain upbeat.

However, observers warned of turmoil if expectations were not met.

“There’s a lot of optimism baked into global markets on the outcome of the negotiations and precisely zero detail on the actual result,“ said Jeffrey Halley, senior market analyst at OANDA.

“A suboptimal outcome could make for a potentially ugly correction in equities and currencies in particular.”

On currency markets, the pound extended Wednesday’s losses that came after Fitch warned it could slash Britain’s credit rating owing to the economic hit from a potential no-deal Brexit.

Adding to sterling’s weakness was Prime Minister Theresa May’s failure to get a breakthrough in talks with European Commission President Jean-Claude Juncker on revising their Brexit deal.

With just over a month until Britain leaves the bloc, May still has no agreement that she can push through parliament.

Adding to her woes was news that three MPs from her ruling Conservative party had quit over her handling of the issue. — AFP


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Asian stocks, currencies boosted by China-US trade deal optimism

HONG KONG: Growing optimism that China and the United States will reach a trade deal lifted most Asian equities today while the positive sentiment also provided support to regional currencies against the safe-bet dollar.

The yuan was among the big gainers following a report that the US has called on China to stabilise the unit as part of any agreement between the world’s top economic powers.

Wall Street returned from a long weekend to provide a healthy lead as US President Donald Trump said trade talks – which resumed in Washington on Tuesday – were “going very well” but were “very complex”.

He also indicated he could put back the March 1 deadline for talks to be concluded – when US tariffs on Chinese goods are due to more than double – saying it is “not a magical date”.

Observers say that while there are no details about the negotiations the fact they are still talking and China appeared responsive to the call for yuan stability was good news.

Hong Kong rose 1% while Shanghai ended up 0.2% and Tokyo closed 0.6% higher. Seoul, Taipei and Manila each climbed more than 1%, Singapore put on 0.4% but Sydney slipped 0.2%.

The upbeat mood on trading floors gave investors confidence to buy higher-risk currencies, pushing the South African rand around 1% higher and Australia’s dollar up 0.7%. The yuan also climbed 0.7%.

The pound held its gains after strong British jobs and wages data, while it was also getting support from hopes that Prime Minister Theresa May could win changes to her Brexit deal with the European Union as she heads to Brussels later in the day.

While EU leaders have said they are not willing to bend on the agreement, analysts say there could be some movement that would help her push it through parliament and avoid a messy divorce that could hammer the British economy.

“The EU is showing some possible concessions about the timing of the exit, as (European Commission chief) Jean-Claude Juncker has said a delay beyond the European parliamentary elections in May would not be opposed, but the UK has to request it, which they have not done,“ said Alfonso Esparza, senior market analyst at OANDA.

In Europe at mid-day today, London’s FTSE 100, Frankfurt’s DAX 30 and Paris’ CAC 40 were all up 0.3% each. – AFP