KUALA LUMPUR: Bursa Malaysia is likely to stage a rebound with the key index reaching the 1,680 level next week on the possibility of US interest rate cuts this month.
Phillip Capital Management Asia-Pacific senior vice-president (investment) Datuk Dr Nazri Khan Adam Khan said following the record-breaking bullish movement of global stocks, the FTSE Bursa Malaysia KLCI (FBM KLCI) was expected to rebound towards 1,680, also driven by signals from US Federal Reserve (Fed) chairman Jerome Powell indicating a possible interest rate cut.
Wall Street’s stock indices hit record highs last Thursday as investors priced in the interest rate signals sent out by Powell, he said.
“Powell’s recent statements decreased doubts that the central bank could be changing its mind on cutting rates after last week’s unexpectedly vigorous jobs report,” he told Bernama.
Despite the robust US jobs report, Powell indicated that the Federal Reserve’s outlook on interest rates remained unchanged.
These recent events have pushed stocks significantly higher while at the same time leaving the dollar on a straight three-day decline.
The S&P 500 climbed by 0.2% to end at 2,999.91 on Thursday – it had earlier in the week reached its highest peak at 3,002 – which is a record close for the benchmark in its history of more than 60 years.
Blue chip-laden Dow Jones Industrial Average surpassed the 27,000 mark for the first time ever headed by stocks in the healthcare sector after US President Donald Trump’s administration decided to drop a plan to limit rebates on medicines.
The Dow was up by 0.9% to 27,088.08. Tech-focused Nasdaq 100 closed lower by 0.1% after also reaching new heights at 7,934.6 points. The index had closed at 7,896.78 points.
On the domestic front, Nazri noted that Malaysia had been ranked the world’s best country to invest in or do business for 2019 by CEOWORLD magazine.
“This exclusive result will boost foreign direct investment flow into our country, which directly adds up to the local economic growth,” said Nazri.
Regarding the technical analysis, he said despite the minor correction below the 38.20 per cent Fibonacci Retracement mark, he believed that the FBM KLCI’s upside development since May was still in play.
“This is given that no strong downside development was sighted yet – an indication that the bulls are still dominating market sentiment. From our technical perspective, this is viewed as merely a normal breather.
“The upside swing could still be extended once the breather ends. In addition, the formation of the “Bullish Divergence” reversal pattern gives an early signal that the trend is shifting from downside towards the upside,” said Nazri.
The immediate support, he said, remained at 1,658 points followed by the critical support at 1,600 points.
On his stock picks for next week, Nazri highlighted GD Express Carrier Bhd and Westports Holdings Bhd, which are from the transportation sector.
For risk-averse investors, he said it was best to avoid global stocks due to uncertainty risk, especially as the US and China had not reached solid peace following their trade dispute.
For the week just ended, Bursa Malaysia was traded higher in the first two days but retreated thereafter, as the local bourse succumbed to profit-taking amid an overbought market.
On a Friday-to-Friday basis, the FBM KLCI declined 13.08 points to 1,669.45 from 1,682.53 a week earlier.
The FBM Emas Index eased 61.04 points to 11,844.25, the FBMT 100 Index declined 71.91 points to 11,669.51 and the FBM Emas Syariah Index trimmed 32.43 points to 12,241.92.
The FBM Ace Index slipped 10.28 points to 4,650.13 and the FBM 70 slid 12.4 points to 14,877.57.
Sector-wise, the Financial Services Index fell 156.42 points to 16,642.19, the Plantation Index decreased 65.85 points to 6,911.28 and the Industrial Products and Services Index inched down 1.2 points to 161.32.
Weekly turnover contracted to 12.99 billion units worth RM10.26 billion from 14.56 billion units worth RM10.22 billion last week.
Main Market volume decreased to 9.36 billion shares valued at RM9.4 billion against 10.53 billion shares valued at RM9.30 billion.
Warrants turnover rose to 1.92 billion units worth RM411.56 million from 1.87 billion units worth RM380.07 million.
The ACE Market volume soared to 4.53 billion shares valued at RM2.55 billion from 2.14 billion shares valued at RM533.77 million previously. — Bernama