EDITION 166 | May 27, 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 Trend Higher, Test 1,800 Level

By Sharifah Pirdaus Syed Ali

KUALA LUMPUR -- Bursa Malaysia is expected to trend higher next week on improved global sentiment and a stronger ringgit with the benchmark index inching upwards to test the 1,800 level. 

Affin Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan, said with a stronger ringgit coupled with encouraging gross domestic product growth of 5.6 per cent for the first quarter of this year, the local market sentiment was expected to remain positive and this would continue to support the local bourse. 

“The ringgit is hovering around its six-month high on the back of steady inflow of demand for the local currency,” he told Bernama. 

For the week just ended, the local bourse had consolidated within the range 1,760 and 1,770 with a declining trading volume due to terror attack in Manchester, England but it is expected to move upwards to test the 1,800 level next week on improved sentiment. 

Nevertheless, he said Bursa Malaysia would still keep track on global equities performance for further clues. 

Additionally, the US stock market which closed at an all-time high, as well as the Federal Reserve’s indication to increase interest rate in June would also brought about positive sentiment to the market, he said. 

He added that the fall in crude oil prices on Friday affected by market expectation of larger supply cut despite the major oil producing countries’ agreement to extend supply cut was expected to be temporary. 

Weekly turnover fell to 16.20 billion units valued at RM14.43 billion from 16.98 billion units worth RM15.60 billion recorded last week.  Main Market volume decreased to 10.45 billion shares valued at RM13.56 billion from last week's 11.30 billion shares worth RM14.71 billion.

Ringgit To Maintain Strength With Upside Bias

By Azlee Nor Mahmud

KUALA LUMPUR -- The ringgit is expected to maintain its strength against the US dollar with an upside bias next week on the back of firmer global oil prices, a research house said. 

FXTM Corporate Development/Market Research Vice President, Jameel Ahmad said the ringgit would find support following the decision by the Organisation of the Petroleum Exporting Countries to extend production cut agreement by another nine months, which should support risk appetite and emerging market currencies. 

“I expect the local note’s performance to remain tilted towards a further gradual recovery against the greenback,” he told Bernama, adding it was partially because the expected US interest rate rise next month had already been priced into the financial markets by most accounts. 

“Another element that would help the ringgit is the dovish undertone from the US central bank which encouraged investors to second guess the longer-term US interest rate outlook,” said Jameel.

For the week just-ended, the ringgit moved between 4.2670 and 4.3350 against the US dollar. 

On a Friday-to-Friday basis, the ringgit was traded higher at 4.3440/3470 against the greenback from 4.3180/3230 last week. 

The local note ended higher against other major currencies for the week. 

It rose against the Singapore dollar to 3.0844/0886 from 3.1056/1114 last Friday and improved versus the Japanese yen to 3.8452/8496 from 3.8723/8782 previously. 

The local unit appreciated against the British pound to 5.4912/4955 from 5.6177/6247 previously and strengthened vis-a-vis the euro to 4.7859/7897 from 4.8176/8245 last Friday.

Money Market Likely To Stay Stable Next Week

By Azlee Nor Mahmud

KUALA LUMPUR -- Short-tenured interbank rates are expected to remain stable next week with Bank Negara Malaysia (BNM) continuing to intervene by mopping up excess liquidity in the market. 

The central bank is expected to intervene with daily tenders and via conventional and Islamic instruments, to stabilise the local money market if needed, a local money dealer said. 

"Usual tools to absorb excess funds from the system would include money market tenders, repo tenders, range-maturity auctions of both conventional and Islamic, and commodity Murabahah programme money market tenders," she told Bernama. 

BNM maintained the overnight policy rate (OPR) at the prevailing rate of 3.00 per cent recently, saying at the current level of the OPR, the stance of monetary policy is accommodative and supportive of economic activity. 

As a result of the country’s Gross Domestic Product growth of 5.6 per cent for the first quarter of 2017, BNM said domestic financial market conditions remained orderly, amid headline inflation rising to 4.3 per cent due to higher fuel prices. 

For the week just-ended, BNM intervened daily to flush the system of surplus funds. 

The total liquidity surplus expanded to RM37.49 billion in conventional operations against RM30.50 billion last Friday, while Islamic funds declined to RM4.7 billion versus RM7.78 billion previously. 

On a week-to-week basis, the benchmark three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) stood at 3.43 per cent. 

Meanwhile, the overnight Islamic reference rate stood at 2.96 per cent, while the one-week, two- and three-week rates stood at 3.02 per cent, 3.06 per cent and 3.11 per cent, respectively, throughout the week.

KLCI Futures Expected To Trade Higher

KUALA LUMPUR -- The FTSE Bursa Malaysia KLCI (FBM KLCI) futures contract is likely to trend higher next week, reflecting the anticipated stronger performance of the underlying cash market. 

Affin Hwang Investment Bank Vice-President and Head of Retail Research, Datuk Dr Nazri Khan Adam Khan said the global positive sentiment, stronger ringgit, as well as the country’s encouraging economic growth for the first quarter of this year was expected to continue supporting market sentiment.

The steady crude oil prices would also set a better tone for the local market next week, he said On a Friday-to-Friday basis, May 2017 added 2.5 points to 1,771.5, June 2017 rose 4.0 points to 1,773.5 while September 2017 and December 2017 improved 3.0 points each to 1,771 and 1,770 respectively. 

Turnover for the week was significantly higher at 52,028 lots from 23,173 lots recorded last Friday, while open interest widened to 57,100 contracts from 37,779 contracts previously.

On Friday, the benchmark FBM KLCI ended 1.66 points lower at 1,772.30.

CPO Futures To See Range-Bound Trading Next Week

By Rosemarie Khoo Mohd Sani

KUALA LUMPUR -- Crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade range-bound next week in a tight band of between RM2,550 and RM2,650 a tonne, said a dealer. 

Interband Group of Companies Senior Palm Oil Trader, Jim Teh said market demand from China for CPO was expected to weaken as buyers were opting for rapeseed and soya bean oil.  

"The oversupply in rapeseed and soya bean oil has dragged their prices lower, and have become the alternative choices for the buyers although the quality of CPO production is good,” Teh told Bernama. 

China is the second largest consumer of the palm oil, after India.  Teh also said the firmer ringgit against the US dollar might also dampen demand for physical CPO buyers. 

For the week-just-ended, CPO futures prices were traded mostly lower throughout the week as sentiment was weaker brought about the cheaper soya bean oil due to oversupply and lower crude oil prices. 

On a Friday-to-Friday basis, June 2017 eased RM45 to RM2,840 a tonne, July 2017 decreased RM82 to RM2,677 a tonne, August 2017 fell RM52 to RM2,555 a tonne and September 2017 shed RM73 to RM2,483 a tonne.

Weekly turnover dipped to 204,185 lots from last week’s 284,081 lots, while open interest narrowed to 236,672 contracts from 257,640 contracts previously.

On the physical market, June South was RM40 lower at RM2,880 per tonne.

Rubber Prices To Track Regional Futures Market Performance

KUALA LUMPUR -- The rubber market is expected to move in line with the performance of the regional rubber futures market next week, a dealer said. 

This include the Tokyo Commodity Exchange (TOCOM), Shanghai Futures Exchange (SHFE) and the rubber futures at the Singapore Exchange (SGX). 

The dealer said the local rubber market's performance would also depend on the movement of the ringgit against the US dollar and the crude oil prices. 

“The Organisation of the Petroleum Exporting Countries (OPEC) on May 25 announced that it would extend cuts in oil output by nine months to March 2018. 

“However, the market was disappointed as investors were anticipating deeper cuts,” said the dealer.  For the week just-ended, trading was mostly higher, tracking the firmer rubber futures prices on regional markets and the stronger ringgit’s movement against the US dollar following higher crude oil prices. 

On a Friday-to-Friday basis, the Malaysian Rubber Board’s noon price for SMR 20 eased 7.5 sen to 657 sen a kg, while latex-in-bulk fell 10.5 sen to 631.50 sen a kg. 

The 5 pm unofficial closing price for SMR 20 shed 23.5 sen to 632 sen a kg, while latex-in-bulk dipped 8.5 sen to 637 sen a kg.

KLIBOR Futures To Remain Subdued

KUALA LUMPUR -- The three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) futures contract on Bursa Malaysia Derivatives will likely remain subdued next week due to lack of demand given the absence of market catalysts. 

For the week just-ended, the market was untraded with open interest remaining at nil. 

On a Friday-to-Friday basis, June 2017, July 2017 and September 2017 remained pegged at 96.53, 96.51, 96.50 and 96.49, respectively. 

The market saw the emergence of a new June 2017 spot month, replacing May 2017.  The underlying three-month KLIBOR on the cash market was also unchanged at 3.43 per cent on Friday.

KLTM Likely To Trend Higher

KUALA LUMPUR -- Tin price on the Kuala Lumpur Tin Market (KLTM) is likely to trade higher next week on stronger demand with the metal prices moving between US$20,000 and US$20,600 a tonne. 

A dealer said the market would continue to be heavily influenced by the tin price on the London Metal Exchange (LME). 

"We expect the metal price will continue to trade on an upward trend, with buying support coming from China, Taiwan, South Korea, Japan and United States," the dealer said. 

Throughout this week, the KLTM saw higher tin trading with prices ranging between US$20,200 and US$20,550 a tonne. 

On Friday, the tin price closed at US$20,430 a tonne, US$230 higher from US$20,200 a tonne on Friday last week. 

On the LME, the tin price also gained US$410 to end at US$20,610 a tonne versus US$20,200 a tonne last week.

Weekly volume on the KLTM increased to 233 tonnes from 176 tonnes last week with Chinese, Japanese, South Korean, Taiwanese and local players accounting for the bulk of the trade. 

The price differential between the KLTM and LME was at a discount of US$180 a tonne compared with a premium of US$370 a tonne last Friday.

Gold Likely To Trade Higher Next Week

KUALA LUMPUR --  Gold futures contract on Bursa Malaysia Derivatives (BMD) is expected to have an upside bias, without factoring any unprecedented geopolitical risks anomalies occurring that could possibly boost safe-haven appeal further.

Phillip Futures Sdn Bhd Dealer, Ler Wee Liang, said he expected Bursa gold futures to be bullish, tracking the movement of New York Commodity Exchange’s  gold futures next week, provided the latter were able to continue their upside strength.

"In the week ahead, should any geopolitical risks in the US or elsewhere escalate,  gold prices are expected to surge higher," he told Bernama, today.

 Gold is often seen as an alternative investment during times of geopolitical and financial uncertainty, gaining alongside bond yields, while stocks usually take a hit.

On a Friday-to-Friday basis, gold futures on Bursa Malaysia for May 2017 declined three ticks to RM174 a gramme, while June 2017, July 2017 and August 2017 advanced eight ticks each to RM174.65 a gramme, RM175.05 a gramme and RM175.55 a gramme.

Turnover for the week was lower at 40 lots worth RM678,000, from the 62 lots worth RM1.08 million recorded last week, while open interest rose to 271 contracts from 265 contracts previously.