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Global stocks mostly climb despite rising trade tensions

NEW YORK: World stock markets mostly climbed Friday despite rising trade tensions, with petroleum-linked shares gaining after OPEC agreed to only a modest production increase.

The Dow snapped an eight-session losing streak, with oil producers Exxon Mobil and Chevron both rising more than two percent on higher oil prices.

Ministers with the Organization of the Petroleum Exporting Countries agreed to ramp up oil production by around a million barrels a day from July.

However, some ministers acknowledged that the actual amount of additional produced will be lower than that amount. US oil prices rose nearly five percent following the agreement, with analysts saying the output increase would be smaller than expected.

The rally in oil prices also gave a lift to French giant Total and London-listed Royal Dutch Shell.

Bourses in Paris and London both rose more than one percent , while Frankfurt rose a more modest 0.5%.

The gains came as the European Union slapped revenge tariffs on iconic US products including bourbon, jeans and motorcycles in its opening salvo in a trade war with President Donald Trump.

Customs agents across Europe's colossal market of 500 million people will now impose the duty, hiking prices on US-made products in supermarkets and across factory floors.

Trump wasted little time in responding, threatening on Twitter to impose 20% tariffs on European-made cars exported to the US, pressuring European automakers including Italy's Fiat Chrysler and Germany's Daimler.

“The underlying tensions between the US and China continue to escalate, and while neither wants a trade war, the US won't accept the status quo, and China won't change its industrial policy,” Rabobank senior strategist Michael Every told AFP.

Many analysts have expressed scepticism that a trade war is inevitable. Still, anxiety is rising.

“The hope is that the Trump administration's tough approach towards its trading partners is a negotiating tactic and the growth-killing implications of an all-out trade war will be avoided,” said Bob Schwartz, senior economist at Oxford Economics. “The latest salvo by Trump on Friday, threatening to impose a 20% tariff on European auto imports, is clearly not encouraging”.

Key figures around 2100 GMT

New York – Dow Jones: UP 0.5 % at 24,580.89 (close)

New York – S&P 500: UP 0.2 % at 2,754.88 (close)

New York – Nasdaq: DOWN 0.3 % at 7,692.82 (close)

London – FTSE 100: UP 1.7 % at 7,682.27 (close)

Frankfurt – DAX 30: UP 0.5 % at 12,579.72 (close)

Paris – CAC 40: UP 1.3 % at 5,387.38 (close)

EURO STOXX 50: UP 1.1 % at 3,441.60 (close)

Tokyo – Nikkei 225: DOWN 0.8 % at 22,516.83 (close)

Hong Kong – Hang Seng: UP 0.2 % at 29,338.70 (close)

Shanghai – Composite: UP 0.5 % at 2,889.76 (close)

Euro/dollar: UP at US$1.1658 from US$1.1604 at 2100 GMT

Pound/dollar: UP at US$1.3260 from US$1.3240

Dollar/yen: DOWN at 109.98 yen from 109.99 yen

Oil – Brent Crude: UP US$2.50 at US$75.55 per barrel

Oil – West Texas Intermediate: UP US$3.04 at US$68.58 per barrel — AFP


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FBM KLCI slides below 1,700 points to 16-month low

PETALING JAYA: The local stock market's benchmark index slipped below the 1,700-point phychological level today as investors were spooked by continued uncertainy in the trade spat between the US and China.

The FBM KLCI sank as much as 27.86 points or 1.63% to 1,681.89 points, its lowest level since January 2017. At the close of trading, it was down by 17.43 points or 1.02% to 1,692.32 points. A total of 2.13 billion shares were traded valued at RM2.68 billion. Market breadth was negative with losers outpacing gainers by 748 to 199.

The broader market was mainly dragged down by banking and telco stocks. Among the top losers were Hong Leong Bank, Telekom Malaysia, Hong Leong Financial Group and Public Bank, which fell 56 sen, 49 sen, 42 sen and 16 sen to RM17.90, RM3.14, RM17.90 and RM22.62, respectively.

Elsewhere in the region, the China and Hong Kong markets continued to see heavy selling pressure. Hong Kong's Hang Seng Index fell 1.35% and the Shanghai composite index lost 1.37%.

In currencies, the ringgit was also weaker today, depreciating as much as 0.3% to 4.0162 against the US dollar. As at 5pm, it was trading at 4.0150.

Maybank Kim Eng, the investment arm of Maybank Group, said at its Invest Asia UK conference yesterday that Asia's underlying fundamentals remain solid with resilient growth prospects despite headwinds from US-China trade friction and rising US interest rates.

Its CEO Datuk John Chong said investors should look beyond the short-term noise and focus on the region's long-term growth prospects. “While there have been substantial capital outflows as a result of the stronger US dollar, higher interest rates and US-China trade friction, Asia is now better positioned to weather the volatility.”

Chong noted that countries in the region have largely strengthened their current account balances, increased their foreign reserves and kept inflation in check over the past five years.

“Stronger private and infrastructure investments as well as a rising middle class are significant growth thrusts going forward. We believe investors will see real value emerging in Asian corporates after the recent market tantrums and should capitalise on the opportunity.”

For Malaysia, Chong said the government's commitment to adopt fiscal reforms and narrow the fiscal deficit bodes well for the country's economy.

Following the recent market correction, he said the FBM KLCI is now priced attractively at 15.4 times on 12 months forward earnings as of June 19.”This puts it at the lower end of its trading range of 15.4x to 17.3x over the past three years.”


Macquarie expects shift to index warrants to continue amid market volatility

PETALING JAYA: Macquarie Malaysia expects the shift to index warrants to continue as volatility in the market increases.

This is especially for investors looking to profit from any short-term falls in prices, as put warrants are one of the few ways that Malaysian investors can profit from falls in the stock market, according to head of equity derivatives products for Macquarie in Asia Barnaby Matthews.

Index warrants were actively traded from March 2018 onwards, particularly the call and put warrants over the Hang Seng Index (HSI), which made up 43.9% of warrants turnover in the first five months of 2018.

Macquarie is the only structured warrants issuer to list structured warrants over the HSI on the Bursa.

Matthews also noted that the recent rise in trading activity reflects further growth potential in the Malaysian warrant market, with structured warrants turnover increasing to an average of RM97.5 million per day for the first five months of 2018 compared with an average of RM25 million per day in 2017.

This was contributed by increased volatility to the Malaysian and global equity markets.

“With rising global geopolitical tensions, trade tensions between China and the US, and Malaysia’s General Election all adding to investor uncertainty.”

Macquarie said the daily turnover hit a high of RM613.1 million on April 6, 2018, which represented a whopping 40.2% of the total turnover on the whole of the Bursa for that day.

“With the local market becoming increasingly uncertain, warrants over Malaysian single stocks took up a smaller piece of the warrants market, constituting 52.3% of warrants turnover in the first five months of 2018, compared to 79.2% in 2017.”

“Warrants over Sapura Energy, Supermax, Hengyuan Refining and My EG Services were actively traded during this period due to renewed volatility, especially around the GE period.”

Following the issuance of 12 new warrants today, Macquarie has issued a total of 1,000 structured warrants in Malaysia since its debut in October 2014.

Year-to-date, Macquarie has commanded the leading market share, with 60.1%1 of the Malaysian warrant market turnover.


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