EDITION 152 | Feb 18, 2017


Market Outlook


1. Bursa Malaysia
2. Forex
3. Money Market
4. FBM KLCI Futures
5. Crude Palm Oil (CPO) Futures
6. Rubber Futures
7. KLIBOR Futures
8. Kuala Lumpur Tin Market (KLTM)
9. Gold Futures


Bursa Malaysia To Trade Firmer Next Week

By Niam Seet Wei

KUALA LUMPUR -- Bursa Malaysia is expected to trade firmer next week, boosted by an increase in investors' confidence following the better-than-expected gross domestic product (GDP) data for the country released on Thursday. 

Affin Hwang Investment Bank Vice President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) would remain buoyant and touch 1,730.  "The FBM KLCI has been breaching the 1,700-point psychological barrier since Monday. Along with the better economic data, it shows that confidence among investors is improving and this will lift buying momentum," he told Bernama. 

Bank Negara Malaysia announced that Malaysia's GDP grew by 4.5 per cent in the fourth quarter of 2016 (4Q16), underpinned by continued expansion in private sector expenditure, leading to a full year growth of 4.2 per cent. 

However, Nazri noted that the local stock market would also be influenced by the ringgit and commodity prices, as that of crude palm oil and crude oil.  "If the commodity prices can recover further next week, it will definitely lend support to the local bourse," he said, adding, the ringgit had started to stabilise at 4.45 against the US dollar recently. 

Apart from that, he said the US Federal Reserve's (Fed) decision on interest rates would also affect the benchmark index.

"Nevertheless, judging from the statement by Fed Chair Janet Yellen during her testimony before Congress recently, there seems to be no rush to increase interest rates," he added. 

Weekly turnover expanded to 11.34 billion units worth RM 12.19 billion from 9.74 billion units worth RM9.27 billion.  Main Market volume widened to 8.22 billion shares valued at RM11.62 bilion from 6.99 billion shares valued at RM6.76 billion.


FOREX: Ringgit Likely To Trade Lower Against Greenback

KUALA LUMPUR -- The ringgit is expected to trade lower against the US dollar next week, moving between 4.44-4.45, a dealer said.  He said the local currency would be influenced by external economic conditions, including any decision and announcement made by US President Donald Trump. 

"Sentiment will also be influenced by an expected US interest rate hike anytime soon following the strong employment and inflation data released," the dealer said. 

Meanwhile, for the months of December 2016 and January 2017, BNM said exports conversion exceeded imports by US$372.9 million and US$741.3 million respectively.  "This may be good and provide support to the ringgit in the short term," the dealer explained. 

For the week just-ended, the ringgit moved between 4.4470 and 4.4510 against the US dollar.  On a Friday-to-Friday basis, the ringgit was traded lower at 4.4510/4550 against the greenback from last Friday's 4.4420/4470. 

The local note ended lower against other major currencies, except the British pound.  The ringgit depreciated versus the Singapore dollar to 3.1416/1451 from 3.1235/1277, decreased against the yen to 3.9417/9463 from 3.9081/9129 and weakened against the euro to 4.7372/7428 from 4.7263/7334.  It rose against the British pound to 5.5273/5336 from 5.5516/5588 . 


Money-Market: Short-Term Rates Likely To Be Stable

KUALA LUMPUR -- Short-term rates are likely to be stable next week with Bank Negara Malaysia expected to offer tenders to absorb excess funds from the system. 

For the shortened holiday week just ended, the overnight rate remained unchanged at 2.95 per cent, while the one-week, two-week and three-week rates were at 3.02 per cent, 3.06 per cent and 3.11 per cent respectively. 

The central bank intervened on a daily basis to mop up surplus liquidity by conducting tenders, including conventional money markets, Islamic range maturity auctions, range maturity auctions, reverse repo tenders, and Qards. 

The total liquidity surplus for the week just-ended was higher at RM29.21 billion in conventional operations against RM27.70 billion last Friday.  Islamic funds increased to RM7.91 billion versus RM8.51 billion previously. 

The benchmark three-month interbank rate stood at 3.43 per cent.


KLCI Futures Likely To Trend Higher

KUALA LUMPUR -- The FTSE Bursa Malaysia KLCI (FBM KLCI) futures contracts will likely trend higher next week, tracking the better performance of the underlying cash market.  Affin Hwang Investment Bank Vice President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the confidence of investors had lifted following the better-than-expected gross domestic product (GDP) data announced on Thursday. 

"The KLCI has breached the 1,700-point psychological barrier since Monday, along with the better economic data, showing that the confidence of investors is improving and would lift buying momentum," he told Bernama. 

Bank Negara Malaysia announced on Thursday that Malaysia's GDP grew by 4.5 per cent in the fourth quarter of 2016 (4Q16), underpinned by continued expansion in private sector expenditure, leading to a full year growth of 4.2 per cent. 

Throughout last week, the futures contracts were traded mostly higher, tracking the performance of the equity market. 

On a Friday-to-Friday basis, February 2017 surged 40 points to 1,709.5, March 2017 rose 10.5 points to 1,708.5, June 2017 added 12.5 points to 1,704.5 and September 2017 bagged 13.5 points to 1,700.  Turnover for the week increased to 24,043 lots from last Friday's 16,511 lots. 

Open interests improved to 28,959 contracts from 26,393 contracts last week.  The benchmark FBM KLCI ended the week 8.74 points better at 1,707.68 from 1,698.94 last Friday.


CPO Futures Traded Mixed This Week Amid Profit Taking, Low Stocks

KUALA LUMPUR -- The crude palm oil (CPO) futures contract traded in mixed style this week, amid mild profit taking activity and concerns over the low stockpile.  The market also was influenced by the better export data released by the Malaysian Palm Oil Board earlier, while a further weakening of the ringgit against the US dollar pushed the price higher. 

However, the gain was limited by mild profit taking and renewed concerned over the CPO export moving performance. 

The Royal Malaysian Customs Department on Friday released a statement stating that the export duty for March 2017 is to be raised to 8.0 per cent from the current 7.5 per cent. 

Traders are worried that the increase could hurt the export performance moving forward, beside slower buying activities from China and India.  The sentiment is expected to be brought on next week, and Interband Group of Companies Senior Palm Oil Trader Jim Teh opined that the market would experience a technical correction. 

"The current CPO price has gone up too high and I think there will be some technical correction next week. The CPO price is expected to be around RM3,000 a tonne and RM3,050 a tonne," he told Bernama. 

He said once the price level is corrected, it will invite more physical buyers into the market. 

On a Friday-to-Friday basis, March 2017 lost RM62 to RM3,094 a tonne, April 2017 declined RM120 to RM2,951 a tonne, May 2017 fell RM137 to RM2,859 a tonne, while June 2017 slipped RM147 to RM2,779 a tonne. 

Weekly turnover advanced to 333,313 lots from 195,595 lots last week, while open interest widened to 281,124 contracts from 251,610 contracts previously.  On the physical market, March South stood at RM3,240 a tonne.


Rubber Market On Mixed Mode This Week

KUALA LUMPUR -- The Malaysian rubber market traded mixed this week, amid the weaker performance of regional futures markets and the Shanghai futures market. 

The market was also affected by a possible increase in stocks moving forward due to the upcoming El Nino season, while demand for the commodity weakened. 

However, the weakening of the market was offset by the downtrend in the ringgit against the US dollar along the week, which slightly stalled a further fall in rubber prices. 

The market was also dampened by losses in oil prices on concerns over the stronger US dollar and expectation of rising US oil production.  It was reported that the benchmark Tokyo rubber futures extended declines on Friday to close 6.3 per cent lower, in tracking losses on the Shanghai futures and on emerging concerns over supply following Thailand's planned sale of the commodity. 

Moving into next week, a dealer said the situation is likely to remain much the same as this week, due to concerns over whether Thailand's government will be further disposing of stocks. 

However, the market may also react to the government's initial plan to look into the possibility of using the commodity on the Pan-Borneo highway project.  Works Minister Datuk Seri Fadillah Yusof was reported as saying that three pilot projects conducted had shown some positive indications over the use of rubber as part of the materials in constructing the 1,000 kilometre highway. 

He said the three trials were done on roads used by palm oil tankers, and were as such, subject to higher wear and tear than normal carriageways.  On a Friday-to-Friday basis, the Malaysian Rubber Board's official physical price for tyre-grade SMR 20 at noon fell two sen to 959 sen a kg, while latex-in-bulk rose 11 sen to 806 sen a kg. 

The unofficial closing price for tyre-grade SMR 20 reduced 11.5 sen to 957.5 sen a kg, while latex-in-bulk ended 12 sen higher 706 sen a kg.


KLIBOR Futures To See Lacklustre Trading

KUALA LUMPUR -- The three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) futures contract on Bursa Malaysia Derivatives will likely see lacklustre trading next week. 

On a Friday-to-Friday basis, February 2017 and March 2017 each remained pegged at 96.55, while April stayed at 96.53 and June 2017 was unchanged at 96.50.  The underlying three-month KLIBOR on the cash market stood at 3.43 per cent on Friday.


KLTM Likely To Trade Higher Next Week

KUALA LUMPUR -- The Kuala Lumpur Tin Market (KLTM) will likely see a higher trading next week on stronger demand with the metal prices moving between US$19,600 and US$20,000 a tonne. 

A dealer said the market would continue to be heavily influenced by the tin price on the London Metal Exchange (LME).  "We predict that the metal price will continue to trade on an uptrend, with buying support coming from China, Taiwan, South Korea, Japan and Europe," the dealer said. 

Throughout this week, the KLTM saw higher tin trading with prices hovering between US$19,600 and US$19,930 a tonne.  On Friday, the tin price closed at US$19,750 a tonne, US$730 higher from US$19,020 a tonne on Friday last week. 

On the LME, the tin price also gained US$650 to end at US$19,725 a tonne versus US$19,075 a tonne last week.  Weekly volume on the KLTM increased to 204 tonnes from 153 tonnes last week with Japanese, South Korean, European, Chinese and local players accounting for the bulk of the trade. 

The price differential between the KLTM and LME widened to a premium of US$25 from a discount of US$55 a tonne last Friday.


Gold Futures Likely To See Uncertain Trading

KUALA LUMPUR -- Gold futures contracts on Bursa Malaysia Derivatives are expected to see uncertain trading next week, in tracking the US COMEX gold market and US Federal Reserve's decision on interest rates, said a dealer. 

He said the COMEX gold prices are expected to be bearish as the US dollar would probably be boosted on hopes ofr US President Donald Trump's tax reform plans. 

Trump has promised to announce a tax reform in a few weeks' time to ease the burden of businesses in the US.  "Local gold prices will be much affected by the that of the benchmark. 

"However, the performance of Bursa Malaysia gold will be supported by the weaker ringgit, following Trump's promise of tax reforms," he said.  For the week just ended, the gold market traded mixed. 

On a Friday-to-Friday basis, February 2017 rose 48 ticks to RM174.70 a gramme, March 2017 increased 41 ticks to RM174 a gramme, while April 2017 and May 2017 rose 40 ticks each to RM174.50 and RM175.10 a gramme. 

Turnover for the week declined to 63 lots worth RM1.09 million from 71 lots worth RM1.22 million last week.  Open interest on Friday was higher at 355 contracts from 323 contracts previously.