Bursa to see further volatility amid US-China trade spat

PETALING JAYA: The local stock market staged a strong rebound today with a gain of as much as 22.87 points or 1.3%, negating the effects of intense selling pressure at the eleventh hour on Wednesday after an escalation in US-China trade tensions.
Concerns about a full-blown trade war abated after US President Donald Trump stated his disinclination for a trade conflict with China in a tweet, followed by his chief economic adviser Larry Kudlow’s statement that the US’ proposed US$50 billion (RM194 billion) in duties on selected Chinese imports could just be a negotiation ploy.
Asian stock markets closed mainly higher today on hopes that a trade war would be averted.
Analysts, however, cautioned that the broader market is expected to be volatile due to uncertainty over how the US-China trade spat will play out.
They believe Bursa Malaysia will be largely driven by global developments, while the upcoming general election will not have a significant impact given that the market has priced in the election factor. It is widely speculated that Parliament will be dissolved tomorrow ahead of the launch of Barisan Nasional’s manifesto on Saturday.
Bursa Malaysia’s benchmark index, the FBM KLCI, rebounded 20.19 points or 1.1% to close at 1,836.13 points today, with 2.22 billion shares valued at RM2.02 billion traded. Market breadth was positive with 660 gainers against 344 losers.
Top gainers included Hong Leong Financial Group, Dutch Lady Milk Industries and Hong Leong Bank, which rose 90 sen, 76 sen and 72 sen to RM19, RM66.96 and RM18.70, respectively.
On the currency market, the ringgit strengthened marginally by 0.03% to RM3.8665 as at 5pm today.
AmBank Research head Anthony Dass said even after Parliament’s dissolution, the local market will continue to be dominated by global trade issues, particularly in the next two to three weeks.
“The market will be volatile pending the latest developments in the US and China. It will be a very choppy market. Not so much on push factor in the domestic front, but is more of a pull factor on the external front.
“The local bourse is moving in tandem with what’s happening on the global side,” he told SunBiz. He added that the trade spat’s impact on Malaysian companies remains to be seen.
Anthony also pointed out that the global market is closely monitoring US economic data, which will influence the US interest rate hike cycle. “If these data do not turn out to be better than expected, then the market will start to react.”
However, he said, it is common to see support from domestic funds in the event of a heavy sell-off by foreign funds in the Malaysian market.
JF Apex Securities head of research Lee Chung Cheng believes the FBM KLCI will remain supported at 1,800 and meet resistance at 1,840.
“Overall, we’re negative on the second quarter because of the global environment and interest rates,” he said, adding that sentiment on the small and mid-cap stocks will remain weak.
Meanwhile, MIDF Research has maintained its year-end target of 1,900 points for the FBM KLCI. “At this juncture, we are nonetheless still hoping that cooler heads will prevail,” it said in a research note today.