MO,9/1/2018, PETALING JAYA: Malaysian stocks continued to rally on sustained buying interest, driven by an upcoming general election (GE) in the country and the strengthening of the ringgit. Gains in the local equity market were also seen to be a result of the spillover effects from the strong performance of US Wall Street last Friday amid a slew of positive economic data.
The key benchmark FBM KLCI rose 14.18 points to close at 1,832.15 yesterday. This means the FBM KLCI has gained about 2% since the start of 2018. Overall market breadth on Bursa Malaysia was positive, with gainers outnumbering losers by 853 to 312 and 327 counters remaining unchanged, 292 untraded and 31 suspended.
Turnover stood at 6.97 billion shares worth RM4.59bil. The trading volume was the second highest ever on record. The highest was 7.669 billion shares done on Aug 20, 2014. The ringgit, on the other hand, continued to strengthen against major currencies, appreciating 0.05% against the US dollar to be quoted at around 3.996 yesterday.
Interestingly, the strengthening of the ringgit saw the local unit breaching below the psychological 3.00-level against the Singapore dollar during intra-day trading yesterday. At the close, the ringgit was quoted at around 3.001 against the Singapore dollar after appreciating 0.42% against the neighbouring currency.
A broker told StarBiz that fund managers could be looking to rotate into equity markets that are playing catch-up, such as Malaysia, which is trailing the MSCI Emerging Markets Index by a very wide margin. “There is optimism on Malaysian stocks, as fund managers expect the local equity market to play catch-up this year after having underperformed its regional peers in 2017,” the broker with a local bank said.
“There are also other factors that are driving investor interest in Malaysian equities. These include an upcoming GE, whereby investors expect government-linked stocks in particular to outperform; the strengthening of the ringgit that is encouraging fund inflows; as well as stronger oil prices, which would benefit Malaysia’s economy,” he explained.
The 14th GE (GE14), which has to be held by August, is widely expected to take place between March and April. The ruling coalition Barisan Nasional is expected to win the GE14.
Separately, an analyst said the Malaysian equity market was also benefiting from the positive market outlook globally. “Globally, equity markets have been on a roll since the beginning of the year, thanks to the slew of positive economic data,” the analyst with a local brokerage said.
“Gains in the FBM KLCI are reflective of the global equity market trend… the US Dow Jones, for instance, has been breaking record after record since US President Donald Trump took office. Last week, the index zoomed above 25,000 points; this will certainly have a positive impact on equity markets in our region,” he explained.
Meanwhile, analysts have turned increasingly positive on the ringgit due to a confluence of domestic and external factors. On the external front, a synchronised monetary policy normalisation in advanced economies is expected to keep the US dollar at a subdued level, while firmer oil prices could provide a further catalyst to the ringgit’s strength.
Domestically, expectations that Bank Negara will increase interest rates soon have attracted fund inflows and boosted the ringgit amid a robust domestic economy. RHB Research Institute, for one, expected the ringgit to strengthen gradually to 3.95 against the US dollar at the end of 2018 from 4.062 as at end-2017.
AmBank Research also expects the ringgit to strengthen to 3.95 by end-2018 in a base-case scenario. In the best-case scenario, the brokerage said the local unit could rise to 3.76 against the greenback. Its full-year average outlook for the ringgit-to-US-dollar exchange rate is 4.00–4.02, as its base case and best case would be at the 3.80–3.82 levels.
Meanwhile, Malaysia’s gross domestic product (GDP) growth is expected to be between 5% and 5.5% in 2018. The country’s GDP growth in 2017 would likely be in the upper end of the official target of 5.2%-5.7%, or even exceed that following the first three consecutive quarters of impressive growth.
Led by the bullish outlook, foreign investors have been pumping liquidity into stocks listed on Bursa since the first week of 2018.
In its weekly fund flow report, MIDF Research said investors had mopped up RM915.1mil net of local equities last week, the biggest weekly net inflow recorded since March 2017.
The rebound in oil prices contributed to sustaining investor interest in local equities.
Crude oil on the international benchmark Brent traded at around US$67.50 (RM270.60) per barrel yesterday, compared with US$48.36 a barrel just six months ago.
Oil and gas-related counters were among the most actively traded stocks in the local bourse yesterday, with Sapura Energy gaining 16.5 sen to close at 97.5 sen, UMW Oil & Gas Corp Bhd up 4.5 sen to 45.5 sen and KNM Group Bhd up three sen to 29 sen. Among the heavyweights, the top gainers included Petronas Gas Bhd , up 84 sen to RM19.20; Petronas Dagangan , up 46 sen to RM25.16; and Hong Leong Bank Bhd, up 40 sen to RM17.60. Top heavyweight losers are Genting Bhd , down 12 sen to RM9.50; Genting Malaysia Bhd , down two sen to RM5.78; and Digi.Com Bhd, down two sen to RM4.87.