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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Govt in talks with China on Panda bonds: Guan Eng

KUALA LUMPUR: Finance Minister Lim Guan Eng today confirmed that Malaysia has received an offer for the issuance of Panda bonds from China and said the relevant parties are currently in discussions.

Speaking to reporters at the 12th Malaysian Property Summit, Lim said the offer from China Construction Bank has been communicated to the Prime Minister and the Cabinet.

“But we are still at the discussion stage. Unlike the Samurai bond for which the working paper has been presented to and approved by the Cabinet, and both countries have agreed on it. This one is still at the discussion stage,” he said.

Earlier this week, China’s ambassador to Malaysia, Bai Tian, said China Construction Bank is proposing to issue Panda bonds in China to Malaysia to help alleviate financial stress.

“I see this as a positive sign from other countries and foreign investors, who are confident about the administration of the new government led by Prime Minister Tun Dr Mahathir Mohamad. Because they are confident, they are willing to extend a loan, just like Japan with their Samurai bond. This is something that is being done for the first time since the 80s,” said Lim.

He said such offers from Japan and China reflect the interest of foreign investors in Malaysia and their confidence in the new government, which was not seen before.

He noted the Samurai bond’s coupon rate of 0.65% is below market rate compared with the coupon rate of a Goldman Sachs bond issuance under the previous government which was 100 basis points above the market rate.

The ¥200 billion (RM7.34 billion) 10-year Samurai bond, guaranteed by the Japanese government, will be issued next month, at a coupon rate not exceeding 0.65%. The Samurai bond was initiated by Mahathir, who requested his Japanese counterpart Shinzo Abe for yen-denominated credit in June last year.

The Samurai bond will be used to reduce debt accumulated by the previous government. The Samurai bond sale will be Malaysia’s first in three decades, having last raised such debt in 1989.

Meanwhile, Lim said the government hopes to conclude talks on the East Coast Rail Link (ECRL) but noted the challenge of ensuring that the cost is something that the country can afford while at the same time maintaining good relations with China.

“We still maintain the best of hopes that this matter can be resolved and that they can meet our request for the price reduction. Otherwise we would not be able to afford it,” he said.

Lim said the ECRL is one of the remaining projects to be concluded while most of the other projects that were being reviewed have been finalised.

As for the proposed Airport Real Estate Investment Trust (REIT), which was announced in Budget 2019, he said it is working towards appointing a REIT manager but it has not been finalised yet.

In his keynote address, Lim said the cost of living is still high although consumer price index (CPI) was at 1% in December, which is the lowest inflation rate in nine years.

He said the government is looking at how to ensure the low CPI can be filtered down and allow the public to benefit from the low inflation rate.

He said the CPI is sometimes used as a benchmark for wage increases, which is not so accurate thus the government is looking at another index that can better reflect the cost of living, so that wage rises reflect the actual situation.

KL shares mixed on profit taking in early session

KUALA LUMPUR: Shares on Bursa Malaysia were mixed in the early session today due to profit-taking activities, following the recent strong gains.

At 9.15 am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) stood at 1,723.69, down 2.49 points from Wednesday’s close of 1,726.18.

The index opened 3.81 points weaker at 1,722.37.

In a note, Public Investment Bank Bhd said profit taking activities could be more rigorous while the FBM KLCI attempts to penetrate above the resistance level of 1,734.

Nevertheless, the bank still anticipated the benchmark index to trend higher for the rest of the week, ranging between 1,720 and 1,734, given that the US Federal Reserve’s minutes from its January meeting showed that officials were generally in favour of a ‘patient posture’ on interest rates.

Market breadth was still positive with gainers outpacing losers 215 to 128, while 248 counters were unchanged, 1,264 untraded and 20 others suspended.

Turnover stood at 425.96 million shares worth RM166.02 million.

Among heavyweights on Bursa Malaysia, Maybank lost one sen to RM9.51, Public Bank shed six sen to RM25, Tenaga eased two sen to RM13.36 and Petronas Chemicals decreased 19 sen to RM8.96.

Of actives, Bumi Armada two sen weaker at 20.5 sen, Sapura Energy gained half-a-sen to 33 sen and Eduspec eased half-a-sen to three sen.

The FBM Emas Index decreased 7.78 points to 12,033.00, the FBM Emas Shariah Index went down 8.16 points to 12,033.29 and the FBMT 100 fell 9.96 points to 11,887.57.

The FBM Ace Index was 10.28 points higher at 4,709.97 and the FBM 70 rose 17.85 points to 14,504.23.

Sector-wise, the Financial Services Index was up 6.28 points at 17,790.02, the Plantation Index edged down 13.52 points to 7,485.04 and the Industrial Products and Services Index was 1.11 point lower at 167.38.

Gold futures contract on Bursa Malaysia Derivatives was untraded in the early session today on subdued demand.

At 9.35 am, February 2019, March 2019, April 2019 and May 2019 stood at RM175.00, RM175.00, RM175.30 and RM174.40 a gramme, respectively.

Volume was nil while open interest amounted to 23 contracts.

At 9.30 am, the price of physical gold down 41 sen at RM169.48 a gramme. — Bernama