REVIEW: While the US Black Friday and Cyber Monday sales showed the US economy remained on a roll, offering a slight lift to global equities, there was a difficult week lying ahead for Bursa Malaysia.
Weak earnings in Corporate Malaysia and the surprising Genting development landed the FBM KLCI deep into red territory early this week.
Genting Malaysia announced on Tuesday that it was taking legal action against Walt Disney Co and 21st Century Fox Ltd for pulling out of an agreement to licence the latter’s intellectual property for a theme park in Genting Highlands.
The theme park was meant to be the jewel in the crown of the Genting integrated tourism plan and had already racked up investments of US$750mil, according to Genting Malaysia. The casino and hotel operator was “played out big time”, a UOB Kay Hian analyst bluntly said before slashing earnings forecasts.
Genting Malaysia’s share price was devastated on Tuesday, sliding about 17%. Holding company Genting fell about 7.5% while hotel operator Only World Group, which was destined to reap the benefits of higher footfall in Genting Highlands, tripped 22%.
Combined, the Genting stocks shaved nearly 10 points off the FBM KLCI on Tuesday.
The index was not faring well in any case, falling a total of 17.02 points to 1,684.97, while market breadth showed an overwhelming number of decliners on the stock exchange. In yet another flip, US President Donald Trump had poured cold water over the prospect of finding a resolution to the trade conflict during a meeting with China at the G20 summit meeting.
Investors have been anxiously awaiting the summit, which takes place on Nov 30 and Dec 1. December will be an eventful month as there will also be an Opec meeting next week, where members will decide on whether to take steps to prevent a possible oil glut. Brent crude had slipped to below US$58 a barrel during the week, with oil prices falling over 20% in November alone.
Meanwhile, corporate earnings in Malaysia had disappointed thus far. Tenaga Nasional was set to worsen the dour mood as its 9M18 earnings slid below expectations.
Market reaction was swift in Wedneday trade with the counter falling as much as 60 sen to RM14.12. By market close, it had partially retraced to RM14.26.
The index closed 1.61 points higher at 1,686.55.
World markets, however, were abuzz at Thursday’s open as US Fed chairman Jerome Powell’s comments to the Economic Club of New York seemed to indicate that the central bank was not as hawkish on the economy as they were earlier led to believe. While Powell had characterised interest rates as being “a long way from neutral” in an Oct 3 Q&A, he tempered the tone this time around, writing that “they remain just below the broad range of estimates of the level that would be neutral for the economy”.
Markets, ever geared to the Fed’s every word, surged on the prospect of the US interest rates taking a breather in 2019 following one last December hike. The FBM KLCI ended 9.79 points higher at 1696.34. Genting stocks, however, continued to fall as it became more evident that a long legal tussle lies ahead.
Powell’s comments were heard overnight, reiterating that interest rates were close to neutral and spurring markets on a rally. Nevertheless, the weight of the upcoming G20 summit bore down on the market, putting it into the red by the mid-morning session. A late afternoon selldown saw the FBM KLCI plunging 16.48 points to 1,679.86, where it found support.
Statistics: Week-on-week, the major index was down 16.02 points or 0.9% to 1,679.86. Total turnover for the week stood at 10.84 billion shares amounting to RM13.14bil compared with 6.96 billion shares worth RM6.04bil over the last four-day trading week.
Outlook: The consolidation phase on the local market persists with investors continuing to err on the side of caution short of a major catalyst to lift the gloom plaguing the global economic outlook. The index ended the week on the 1,680 support as a precautionary measure ahead of the Trump-Xi Jinping meeting.
Should there be a breakthrough or breakdown in discussions when the two leaders meet on Saturday, there will be a watershed moment in the ongoing trade war saga. Global equities are expected to experience some volatility during Monday’s open following developments from the G20 summit.
The Opec meeting will be the second catalyst as their decision on whether to cut supply will have an immediate impact on oil prices, which are currently trading at October 2017 levels.
The key technical indicators indicate slowing momentum, which indicates downwards pressure over the immediate term.
The present resistance remains at 1,709, with 1,733 and 1,760 pegged as further resistance. Should the 1,680 support fail to hold, 1,652 and 1,609 represent further supporting levels.