Action-packed week expected in the market

KUALA LUMPUR: Turbulence in the markets overseas, ignited by the growing debt concerns in Europe, are expected to influence trading patterns on Bursa Malaysia in a week filled with vital economic data and the release of quarterly financial results of the country’s largest banks.

Gross Domestic Product (GDP) growth data for the first quarter and a decision on whether interest rates would be raised are scheduled to be announced on May 13 while the results of Malayan Banking Bhd and CIMB Group Holdings Bhd are expected to be announced towards the end of the week.

OSK Investment Bank research head Chris Eng said that because of the bad news in European markets, the local bourse is expected to see shaky trading but he sees some calm returning to markets after Wall Street stabilises.

“There should be a rebound in global markets towards the end of the week,’’ he said.

Global markets were roiled on Thursday and Friday as concerns over the Greek debt crisis and its possible contagion to the rest of Europe and the major global banks boiled over, culminating in a huge drop on Wall Street that saw all the gains of the year wiped off.

After falling 347.8 points on Thursday, the Dow Jones Industrial Average slipped a further 139.89 points on Friday as worries gathered momentum that the current turmoil in Greece and Europe had the makings of a fresh credit crisis.

German Chancellor Angela Merkel on Saturday said Greece was not the only country in Europe that was facing financial market pressures, and described the situation as serious.

“Amid prevailing nervousness, news and developments will be interpreted in an amplified way. Hence, I expect a high level of liquidity ahead as investors watch ramifications of the euro debt crisis, including the impact on the euro, British politics, recent US trading glitches and locally, the upcoming Bank Negara monetary policy meeting,’’ said Kumpulan Sentiasa Cemerlang Sdn Bhd research director Tan Beng Ling.

Despite the gravity-defying performance by the FTSE Bursa Malaysia KLCI on Friday – it was the only major stock market that closed up – analysts do not think investors would be able to repeat that performance, should conditions sour when trading kicks off in Asia today.

The FBM KLCI closed up 1.02 points on Friday to 1,332.89.

But the one silver lining many are waiting for would be economic and earnings data.

The release of the first quarter GDP data and the potential increase in interest rates on Thursday would be welcomed by investors.

Expectations are rife that the first quarter GDP number would beat consensus expectations although many brokers of late have tweaked their first quarter numbers upwards in the past week or so after export data came in much stronger than what the market was looking for.

There is a sense of belief that the first quarter GDP would hit double digit for the first time in a decade. Even if it does not, the GDP number should come in at the high single-digit range.

Confirmation of a strong first quarter would come after industrial production data is released tomorrow. Helping sentiment locally would also be the widely expected decision by the Monetary Policy Comittee on Thursday to lift the overnight policy rate (OPR) by another 25 basis points.

Eng said the market had built in a rise of 25 basis points in the OPR when the policy statement was released and that would help the ringgit and possibly sentiment in Malaysia.

Investors would also be keeping a keen eye out for numbers from the country’s two largest banks. Helping their numbers would not only be a growing domestic franchise but contributions from their overseas subsidiaries, particularly from Indonesia.

“When the dust settles, I believe the relative strength of Asia ex-Japan will be appreciated even better,’’ said Tan.

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