Investors stay put as G20 Summit looms

REVIEW:The spectre of dimishing growth on the global scene has only been reinforced by the recent selling pressure seen in oil prices.

While the US waivers for certain countries to continue purchasing oil from Iran was the trigger for the steep pullback in crude futures, the selldown was a reminder that confidence in global fundamentals is shaky.

As at yesterday, the Brent and the US benchmark WTI have retraced about 27% and 29%, respectively, from their highs on Oct 3.

With Brent now hovering at about US$62 a barrel, the weakness in the commodity does no favours for the ringgit.

The mounting pressure on the local currency, already weakened from expectations of a fourth interest rate hike by the US Federal Reserve in December, continues to lend to capital outflow.

In the week of Nov 10 to 16, foreign funds sold RM417.3mil net of local equities, more than twice the amount of the net withdrawals in the previous week.

On the local market, Telekom Malaysia was the subject of investor attention following the resignation of its acting CEO as well as a letter of reprimand from the Malaysian Communications Multimedia Commission for its poor service quality.

The counter slid 5% even as investors speculated that the counter will likely be removed from the FBM KLCI at its next review, given its significantly reduced market capitalisation.

However, the broad selloff in global equities this past week would begin with Apple Inc in the US market, as it led indices lower after data showed demand for its iPhones were soft. This was compounded by a selloff in energy stocks at the midweek as investors lost their nerve given the rout in oil prices.

Wall Street’s Monday performance reflected the start of the week’s equities decline with the Nasdaq falling nearly 3% and the Dow Jones and S&P500 dropping over 1% each. FANG stocks fell sharply across the board with Facebook leading the pack with a 5.1% slide.

Then on Tuesday, while Bursa Malaysia slumbered, energy stocks took their downward turn in US markets, triggering a second day of declines for global equities.

As expected, Wednesday’s open on Bursa Malaysia was met with swift selling. Twenty-seven of the 30 component stocks on the FBM KLCI ended in the red, with only one gainer, Telekom Malaysia, which rebounded following the selldown previously.

At market close, the FBM KLCI was down 15.34 points to 1695.37, once again en route to the supporting level of 1,680.

Data was released that same day showing a fall in US crude inventories, halting the decline in oil prices. Saudi Arabia, meanwhile, looked set to steer Opec towards a supply cut of one million to 1.4 million barrels per day to prevent oversupply and a return to a glut situation.

While oil prices rebounded, so did energy stocks on Wall Street. FANG stocks save Netflix also retraced some losses from the two-day decline although Apple faltered even as the market headed into the Thanksgiving holiday.

The mood on Bursa Malaysia remained bearish and trading volume on the stock exchange remained low as investors opted out in light of any positive catalysts. Coupled with poor corporate earnings results, there were few reasons for investors to jump back into the fray.

At Thursday’s close, the market was flattish at 1,695.62.

With Wall Street and Japan’s markets closed for holidays yesterday, Asian markets were missing a rudder. The promised meeting between Trump and Xi Jinping on the sidelines of the G20 summit in Argentina from Nov 30 to Dec 1 served as a key risk event that weighed heavily on investors’ shoulders.

On Bursa Malaysia, a disappointing corporate earnings season added to the gloom and doom. Investors decided to sit on the sidelines ending the day with yet another flat result at 1,695.88.

Statistics: Week-on-week, the major index was down 10.5 points or 0.6% to 1,695.88. Total turnover for the Deepavali-shortened week stood at 6.96 billion shares amounting to RM6.04bil compared with 9.72 billion shares worth RM8.94bil over the last trading week.

Outlook: The sluggish movement on the local stock exchange is showing no sign of ending as investors remain bearish over the state of the global marketplace. The short-term descending trend line on the FBM KLCI is growing stronger with the stock headed towards the support of 1,680.

A breach of the 1,680 support would lend more risk of a major breakdown as the short-term price movement has taken on the shape of a descending triangle. The chart formation lends the suggestion that anxious investors are primed for a heavy selldown in the advent of more negative news. The subsequent support rests at 1,652.

On the upside, the immediate target lies at 1,709 with further resistance seen at 1,733.

The slow-stochastic remains descending at 55 points suggesting weakening momentum in the days ahead. While trading volume is expected to remain slow in the coming week, the approaching meeting between Trump and Xi would likely create decisive new leads for investors.