KUALA LUMPUR, June 29 ― Bursa Malaysia is likely to stage a rebound next week on bullish sentiment, Phillip Capital Management said.
“Following the bullish recovery of local stocks from the 1,640 baseline, we expect the FTSE Bursa Malaysia KLCI (FBM KLCI) to find stability next week after the much-anticipated G20 summit in Osaka,” Asia-Pacific senior vice president (investment) Datuk Dr Nazri Khan Adam Khan said.
He believes sentiment will remain strong to new details and updates from Osaka.
“China is assumed to prioritise the US lifting its ban on telecommunication company Huawei, which is positive for the market. Hopes have been raised to see a positive solution concerning this trade deal,” he told Bernama.
Nazri said the immediate strong resistance was set at 1,700 points, while immediate support seen at around 1,658 pts, followed by a meaningful 1,600-point support.
“Our upside view is supported by the multi-month positive divergence between the index movement against the 14-day Relative Strength Index (RSI) indicator, which suggests that the FBM KLCI is bottoming,” he added.
Nazri said Malaysia, along with countries like Singapore, Thailand, and the Philippines, showed resilience amid the ongoing trade war between Washington and Beijing.
“So far, the trade war only affects 0.1 per cent to 0.2 per cent from local gross domestic product (GDP),” he said, adding that Malaysia and other countries had loosened their fiscal policy over the past year in an effort to tackle the weak demand on the export trade.
Affin Hwang Capital said year-to-date losses on the FBM KLCI had narrowed from -5.46 per cent in May to -0.83 per cent, largely led by expectations of the US Federal Reserve easing and a potential resolution of global trade tensions.
It said strong equity fund outflows in the early part of the year had also subsequently tapered off in recent weeks while the ringgit had recovered by 1.19 per cent from its lows.
“We see three catalysts for the market that could positively surprise: sharper-than-expected cut in the US interest rates leading to fund inflows back to the region; heightened mergers and acquisitions activity spurring investor focus, particularly in depressed sectors; and GDP upside surprise as infrastructure spending accelerates.
“Although from a corporate earnings and valuation angle this may not warrant funds to re-visit Malaysia, we believe that the sharp fall in stock prices over the past two years, low foreign holdings and the potential thematic ideas could spark some selective interest,” it added.
On the negative side, it said local corporate earnings revisions remained negative, and this trend could sustain should trade tensions persist, leaving limited ground for the FBM KLCI to trade above its current price-to-earnings ratio multiple of 18 times.
“Also, the FBM KLCI still has two major overhangs ahead of it – a further reduced weighting with the upcoming MSCI rebalancing and the risk of Malaysia falling out of the FTSE World Bond Index in the September review,” it said.
Overall this week, Bursa Malaysia was traded mostly lower amid an overbought market after last week’s rally and uncertainty over the US-China trade war.
On a Friday-to-Friday basis, the benchmark FBM KLCI dropped 10.10 points to 1,672.13 from 1,682.23 last Friday.
The FBM Emas Index declined 67.93 points to 11,781.58, the FBMT 100 Index dropped 72.36 points to 11,631.65 and the FBM Emas Shariah Index slid 77.48 points to 12,132.94.
The FBM Ace Index added 48.11 points to 4,445.45 and the FBM 70 lost 99.39 points to 14,599.71.
Sector-wise, the Financial Services Index fell 59.95 points to 16.686.61, the Plantation Index contracted 50.64 points to 6,968.90 and the Industrial Products and Services Index inched down 1.40 points to 160.72.
Weekly turnover decreased to 9.47 billion units worth RM8.73 billion from 10.56 billion shares valued at RM10.81 billion last week.
Main Market volume fell 6.05 billion units valued at RM7.93 billion from 6.14 billion shares worth RM9.58 billion.
Warrants turnover eased to 1.95 billion units worth RM442.2 million from 2.11 billion units valued at RM584.29 million.
The ACE Market volume dropped to 1.44 billion units valued at RM332.69 million from 1.84 billion shares worth RM633.37 million. ― Bernama
