EDITION 197 | Jan 20, 2018


MALAYSIA  e-Biz

Market Outlook

LIST OF MARKET REPORTS:

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

Bursa Malaysia To Continue Upward Momentum Next Week

By Zarul Effendi Razali

KUALA LUMPUR -- Bursa Malaysia is expected to continue its positive momentum next week, driven by a stronger ringgit, firmer oil price, strong global economic outlook, and better corporate earnings, a dealer said.

Affin Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the global economic outlook was looking good so far this year, triggered by buying interest among local and foreign investors.

"It has been a good start (for FBM KLCI) this year, with positive outlook on the local and global economy. The local benchmark index has experienced the highest fund inflows in three years, signalling investors’ confidence towards our market," he told Bernama.

For next week, he said that the FBM KLCI would likely move between 1,800 and 1,850 points.

"The strong oil prices have so far lent support to our market, of which about 30 per cent of companies on Bursa Malaysia are directly and indirectly involved in the oil and gas industry," he said.

TAX REFORM PLAN

He said that the benchmark index would also be affected by US President Donald Trump’s tax reform plan.

As the week ended, the market was traded mostly higher, benefitting from gains in the Wall Street, as well as positive economic data from China.

However, the European Union’s (EU) approval of draft measures to back a ban on the use of palm oil in biofuels from 2021 on Thursday has hurt the plantation and palm oil related counters as the commodity is a major export from Southeast Asia to the EU.

On a Friday-to-Friday comparison, the FBM KLCI performed better, gaining 6.16 points to end the week at 1,828.83.

On the scoreboard, the FBM Emas Index slipped 26.78 points to 13,195.82, the FBMT 100 Index decreased 2.06 points to 12,860.60, the FBM Emas Shariah Index dipped 79.87 points to 13,627.46, the FBM 70 shed 154.79 points to 16,472.37, and the FBM Ace fell 192.66 points to 6,713.12.

SECTORAL PERFORMANCE

On a sectoral basis, the Finance Index surged 26.07 points to 17,236.98, the Plantation Index fell 99.45 points to 8,037.87 and the Industrial Index erased 31.52 points to 3,368.02.

Total turnover slipped to 25.35 billion units valued at RM15.97 billion from 27.14 billion units valued at RM19.11 billion in the previous week.

Main Market volume decreased to 17.14 billion shares worth RM14.73 billion from the previous Friday’s 17.88 billion shares worth RM17.59 billion.

Warrants turnover declined to 2.64 billion units worth RM448 million from 3.46 billion units worth at RM479.51 million previously.

The ACE Market narrowed to 5.51 billion shares valued at RM778.77 million against the previous week’s 5.74 billion shares valued at RM1.02 billion.


Ringgit To Trade Firmer Against US Dollar Next Week

KUALA LUMPUR -- The ringgit is likely to remain firm against the US dollar as part of the build up to the highly anticipated Bank Negara Malaysia’s (BNM) Overnight Policy Rate (OPR) decision at the end of next week.

Market rumours are rife that the BNM's Monetary Policy Committee (MPC) meeting next week may raise the OPR by 25 basis points (bps) to 3.25 per cent after the hawkish shift in the last meeting.

Technical outlook has indicated more room for the ringgit to improve, with the pair (USD/RM) likely to challenge a 3.9160 level in the next leg lower, according to Hong Leong Research.

"Caution that a strong but brief weakness may prevail if OPR is hiked and the (MPC) statement turned neutral, otherwise, the ringgit strength is likely to extend into the coming months as markets set sights on future hikes," it said in a note.

Malaysia's stronger trade performance, higher oil prices and weaknesses of the US dollar have helped lift the ringgit after a prolonged period of decline.

US FUNDING ISSUES

FXTM Research shared the greenback was pummelled and pounded by investors on Friday on growing fears of a possible the United States government shutdown over funding issues.

It said sentiment remained bearish towards the US dollar with further downside on the cards, as political uncertainty in the US weighed heavily on the currency.

"From a technical standpoint, the US dollar Index is heavily bearish on the daily charts," it said in a note.

On a Friday-to-Friday basis, the local note finished at 3.9360/9400 against the greenback, the level last seen in July 2016 from 3.9700/9730 the previous week.

On Friday, it advanced 180 pips to an 18-month high as the greenback weakened and traders started pricing in the OPR hike probability next week.

RINGGIT VS OTHER CURRENCIES

The ringgit was, however, traded mixed against a basket of major currencies.

It advanced against the Singapore dollar to 2.9820/9869 from 2.9895/9924 the previous week and appreciated vis-a-vis the yen to 3.5572/5617 from 3.5727/5761 last week.

The local unit eased against the pound sterling to 5.4742/4801 from 5.4040/4084 last Friday and versus the euro, it slipped to 4.8322/8387 from 4.8128/8181 last Friday.

Besides BNM's MPC meeting in the week ahead, policy meetings of the European Central Bank and Bank of Japan will also be scrutinised, as recent shifts in policy rhetoric from all the three central banks spurred expectations of policy normalisation.

Next week’s calendar is also jam-packed with numerous market-moving data, including the US fourth quarter gross domestic product, Markit US services and manufacturing Purchasing Managers' Index, initial jobless claims, home sales, leading index, durable goods orders, and wholesale inventories.

 


Money Market Cautious Ahead Of MPC Meeting Next Week

By Azizul Ahmad

KUALA LUMPUR -- Investors and and money-market players are cautious ahead of the BNM's Monetary Policy Committee (MPC) meeting next week which may decide to raise the Overnight Policy Rate (OPR), which currently stood at three per cent.

Market rumours are rife that the central bank may raise the OPR by 25 basis points (bps) to 3.25 per cent after the hawkish shift in the last meeting.

The short-tenured interbank rates, however, are expected to remain stable next week with BNM continuing to intervene by mopping up excess liquidity from the market.

"Opinions are mixed in the market. Market talks indicate that there is a chance that BNM’s MPC will decide a rise in OPR by 25 bps next week, after the hawkish shift in the last meeting.

"In addition, some quarters opined that fundamentally, the hike is not necessary," a local money dealer told Bernama.

OPR ADJUSTMENT

The last time the central bank adjusted the OPR was in July 2016, when it reduced the rate (from 3.25 per cent) by 25 bps to three per cent, citing rising risks from Britain's exit from the European Union.

BNM maintained the OPR rate of three per cent since then, following its stance that monetary policy is accommodative and supportive of the economic activities.

She said with OPR hike or not, the central bank was expected to intervene with daily tenders and via conventional and Islamic instruments to stabilise the local money market if needed.

Usual tools to absorb excess funds from the system include money market tenders, repo tenders, range-maturity auctions of both conventional and Islamic, and commodity murabahah programme money market tenders.

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

The total liquidity surplus for the week just-ended advanced to RM28.62 billion in conventional operations against RM27.04 billion last Friday, while Islamic funds rose to RM9.17 billion versus RM8.72 billion previously.

On a week-to-week basis, the benchmark three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) inched up to 3.44 per cent from 3.43 previously.

Meanwhile, the overnight Islamic reference rate stood at 2.97 per cent, while the one-, two- and three-week rates stood at 3.03 per cent, 3.07 per cent and 3.12 per cent, respectively, throughout the week.


KLCI Futures To Trade Higher Next Week

By Zarul Effendi Razali

KUALA LUMPUR -- The FTSE Bursa Malaysia KLCI (FBM KLCI) futures contract (FKLI) on Bursa Malaysia Derivatives is likely to trend higher next week, buoyed by expectations of stronger cash market, a dealer said.

Affin Hwang Investment Bank Vice-President/Head of Retail Research Datuk Dr Nazri Khan Adam Khan said the FBM KLCI was expected to continue its upward momentum next week on the back of solid economic outlook, strengthening oil price and better corporate earnings forecast.

The local benchmark index has experienced the highest fund inflows in three years, signalling investors’ confidence towards our market," he told Bernama.

For the week just ended, the futures market was higher in tandem with the cash market.

On a Friday-to-Friday basis, January 2018 added 4.5 points to 1,833, February 2018 gained 3.5 points to 1,832, March 2018 advanced 2.0 points to 1,829.5, and June 2018 rose 3.0 points to 1,827.5.

Weekly turnover slipped to 21,234 lots versus 24,615 lots last week, while open interest widened to 37,279 contracts from 34,240 contracts previously.

For the week just ended, the FBM KLCI ended on a firm note, gaining 6.16 points to 1,828.83 on Friday compared with 1,822.67 in the previous week.


CPO Futures Expected To Be Quiet Next Week

KUALA LUMPUR -- Crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives will likely see a quiet trading next week with prices to move between RM2,400 and RM2,460 per tonne, dealers said.

A dealer said there would be a dwindling number of players, especially from European countries, following the European Union’s vote to ban palm oil usage in biofuels, claiming palm oil has led to deforestation.

He said another factor that would likely influence the CPO prices would be the ringgit movement, as well as the global crude oil prices performance.

For the week just ended, the market was traded mostly lower throughout the week due to concerns on the European Union’s plan to ban the palm oil usage in the biofuel market from 2021 onwards.

On a Friday-to-Friday basis, February 2018 shed RM93 to RM2,435 per tonne, March 2018 dropped RM92 to RM2,444 per tonne, April 2018 eased RM85 to RM2,445 per tonne, and May 2018 declined RM82 to RM2,448 per tonne.

Weekly turnover decreased to 242,751 lots from last Friday’s 250,767, while open interest slightly increased to 268,514 contracts from 265,946 contracts.

On the physical market, January South was RM80 lower at RM2,440 per tonne.


Rubber Market May Trade Higher Next Week

KUALA LUMPUR -- The Malaysian rubber market may trade higher next week on the expected increase in demand, dealers said.

A dealer said the recent rise in global oil prices had also contributed to higher prices for natural rubber.

"Crude oil formed the raw materials used in the production of synthetic rubber, and higher oil prices have made natural rubber a more attractive buy.

"The raining season in major producing countries such as Thailand and Malaysia may also be another supporting factor for the market next week," he said.

He added that the market might also take the cue from the movement on the Tokyo Commodity Exchange.

On a Friday-to-Friday basis, the Malaysian Rubber Board's noon price for tyre-grade SMR 20 fell half-a-sen to 565.0 sen a kg, while latex-in-bulk gained 10.5 sen to 493.0 sen a kg.

The 5 pm unofficial closing price for SMR 20 was 2.5 sen higher at 595 sen a kg and latex-in-bulk gained 13 sen to 492.5 sen a kg.


KLIBOR Futures To See Some Trading Next Week

KUALA LUMPUR -- The three-month Kuala Lumpur Interbank Offered Rate (KLIBOR) futures contract on Bursa Malaysia Derivatives is expected to show some trading next week, after a long period of inactivity due to the absence of market catalysts.

A money dealer said some movements in the futures mart could be expected next week if players were to continue pricing in the interest rate hike probability at the underlying cash market.

Market rumours are rife that the Bank Negara Malaysia (BNM) might raise the Overnight Policy Rate (OPR) by 25 basis points to 3.25 per cent, at its Monetary Policy Committee meeting at the end of next week, after the hawkish shift in the last meeting.

"The OPR rate hike bets could have been the reason behind the underlying KLIBOR rates inching up on Friday. There is no shortage of liquidity in the market, but the chase for longer dated liquidity could have driven up the rate.

"Expect some movements in the futures mart as players continue pricing in the OPR hike probability next week," he told Bernama.

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

On a Friday-to-Friday basis, settlement prices for February 2018, March 2018, April 2018 and June 2018 remained pegged at 96.48, 96.45, 96.43 and 96.40, respectively.

The underlying three-month KLIBOR inched up to 3.44 per cent from 3.43 per cent previously.


KLTM Likely To Be On Downtrend Next Week

KUALA LUMPUR -- The Kuala Lumpur Tin Market (KLTM) is expected to be weak in a subdued trading amid lack of catalysts, said a dealer.

The dealer said the tin price was expected to linger between US$20,200 per tonne and US$20,450 per tonne, while most buyers would be on the sidelines in the absence of fresh leads.

Nevertheless, the performance of the London Metal Exchange (LME) may also influence local tin price, said the dealer.

For the week just ended, the KLTM was higher in the early parts of the week before retreating to close unchanged on Friday in a directionless market.

On a Friday-to-Friday basis, the price on the KLTM rose US$260 to US$20,370 per tonne from US$20,110 per tonne last week.

On the LME, the tin price increased US$210 to end at US$20,435 a tonne from US$20,225 a tonne previously.

Turnover for the week was slightly higher at 282 tonnes from 232 tonnes last week.

On price differential between the KLTM and LME, the former was at a discount of US$65 per tonne from a discount of US$115 per tonne last week.


Gold Futures Contract To Trade Sideways Next Week

KUALA LUMPUR -- The gold futures contract on Bursa Malaysia Derivatives is expected to trade sideways next week, tracking the US Commodity Exchange’s (COMEX) gold futures market and the ringgit performance.

A dealer said the the yellow metal wais likely to remain buoyed next week amid the US dollar weakness and political uncertainty in the United States following a possible government shutdown.

Although the local gold futures may get influence by the sentiment and the lingering bullish bias for the COMEX gold futures market, the strong ringgit, which is expected to strengthen further, could dampen demand for gold futures contract quoted in local currency.

"As both COMEX and ringgit could continue their bull runs for the coming week, that would lead to sideways and cautiously range-bound market," he said.

On a Friday-to-Friday basis, January 2018 declined 20 ticks to RM168.90 a gramme, February 2018 eased 16 ticks to RM169.30 a gramme and March 2018 erased 11 ticks to RM170.00 a gramme, while April 2018 shed 18 ticks to RM169.75 gramme.

Weekly turnover slipped 22 lots valued at RM374,545 from 28 lots worth RM476,470, while open interest on Friday dropped to 69 contracts from 74 previously.