KUALA LUMPUR: The ringgit's upward momentum after reaching a seven-month high on Friday is expected to hit a snag next week as renewed concerns loom over the global markets amid the ongoing US-China trade war.
A dealer said despite earlier reports that the White House would send a representative to Beijing to discuss trade matters, US President Donald Trump reportedly said he was less optimistic on a trade discussion as he would not meet Chinese President Xi Jinping.
"This has led to renewed concerns among investors as it involves the two economic powerhouses, whose trade deadline is on March 1," he said.
On Dec 1, 2018, both China and the US agreed to a ceasefire in their trade war after high-stakes talks at the Group of 20 summit in Argentina between Trump and Xi.
The talks have led to the 90-day trade truce including no escalating tariffs on Jan 1, 2019.
The dealer said that if there were no new consensus reached between the two nations on the trade deals, businesses would face the consequences because the US would raise tariffs on US$200 billion worth of Chinese imports to 25 per cent from the current 10 per cent.
The trade dispute has also caused the oil price to take a dip today as economic concerns loom in both countries.
"In the US, Trump's poll numbers have taken a dive recently while China is under pressure as its gross domestic product grew at its slowest pace in decades, which is a worrying sign of an economic slowdown," he said.
The ringgit is expected to trade between 4.07 and 4.08 next week due to external factors as well as profit-taking by investors.
As at 6 pm Friday, the benchmark Brent crude was at US$61.59 per barrel compared with US$62.69 per barrel Friday.
During the holiday-shortened trading week, the ringgit finished at a seven-month high against the US dollar at 4.0670/0720 today compared with 4.0930/0980 on Thursday last week due to higher commodity prices.
Meanwhile, the local currency was traded higher against other major currencies.
The local market was closed on Tuesday and Wednesday for the Lunar New Near.
The ringgit appreciated versus the Singapore dollar to 2.9988/9029 on Friday from 3.0409/0450 on Thursday last week, inched up against the Japanese yen to 3.7023/7079 from 3.7699/7749 and rose against the euro to 4.6059/6124 from 4.7000/0070.
However, the local currency rose vis-a-vis the British pound to 5.2590/2667 from 5.3688/3758 previously as the latter currency is now being influenced by the ongoing Brexit development.
On Bursa Malaysia trading is expected to be reinvigorated next week with the market moving in a tight range as most investors flock back from the Chinese New Year celebration, analysts said.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) had been struggling to pierce its immediate resistance of 1,700 points over the last few weeks.
“External developments continue to take centre stage. Issues surrounding the trade negotiations between the US and China has always been the source of market instability," he said
"Against such backdrop, we could expect the FBM KLCI to continue remaining in a tight range next week," said Mohd Afzanizam.
Additionally, Malaysia's 2018 fourth-quarter (Q4 2018) gross domestic product numbers would be announced on February 14.
“Perhaps, investors would also want to assess the resilience of the Malaysian economy.
"This is especially true in the context of weak business and consumer sentiment as indicated by the Malaysian Institute of Economic Research's survey recently," the chief economist said.
The Business Condition Index and Consumer Sentiment Index fell to 95.3 points and 96.8 points in Q4 2018 from 108.8 points and 107.5 points in the previous quarter, respectively.
Affin Hwang Capital Asset Management managing director Teng Chee Wai remained optimistic on the US-China trade negotiations as the backdrop of the global economy was actually very strong, while the vision of a downtrend in local corporate earnings is still an ongoing process.
"Putting the two together, this year will probably be a better year than last year from the equity market standpoint,” said Teng.
On a Friday-to-Thursday basis, the benchmark FBM KLCI settled 2.99 points higher at 1,686.52.
The market was closed on Tuesday and Wednesday for the Chinese New Year. The FBM Emas Index was 64.9 points higher at 11,725.52, the FBMT 100 Index increased 56.33 points to 11,601.54 and the FBM Emas Shariah Index improved 40.42 points to 11,593.03.
The FBM 70 gained 215.69 points to 14,032.9 and the FBM Ace Index added 153.12 points to 4,555.22.
Sector-wise, the Financial Services Index rose 127.14 points to 17,642.11, the Plantation Index increased 19.36 points to 7,299.6, and the Industrial Products and Services Index inched up 0.86 of-a-point to 161.97.
On a Friday-to-Thursday basis, weekly turnover dwindled to 4.94 billion units worth RM3.8 billion against 8.77 billion units worth RM8.13 billion.
Main Market volume shrank to 3.77 billion units valued at RM3.57 billion versus 6.32 billion units valued at RM7.66 billion.
Warrants turnover declined to 690.66 million units worth RM149.03 million from 1.38 billion units worth RM301.90 million.
The ACE Market volume decreased to 483.1 million shares valued at RM83.25 million against 1.05 billion shares valued at RM152.46 million.
In the commodities sector crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to rise further next week when most players return after the Chinese New Year holidays and spur demand for the edible oil, a dealer said.
He said the CPO price, which has broken the key resistance of RM2,100 per tonne, would likely trade above the RM2,250 per tonne level next week.
“Players may place fresh positions after squaring their positions due to the shorter trading days during the week,” he said.
The futures market was traded half-day on Feb 4 and closed for two days from Feb 5-6 for the Chinese New Year celebration.
Meanwhile, the dealer said Brent crude oil price which is currently trading at above US$60 per barrel would also provide some support to the palm oil market.
“Crude oil price often lends support to the palm oil markets as the commodity is used as an alternative source of energy,” he added.
For the week just ended, the CPO futures prices were traded mostly higher, particularly earlier in the week in line with the better prices in edible oils. Nevertheless, the prices subsequently fell, no thanks to the higher ringgit versus the US dollar.
On a Friday-to-Thursday basis, February 2019 fell RM10 to RM2,190 a tonne, March 2019 and May 2019 eased RM13 each to RM2,255 and RM2,308 a tonne, respectively, while April 2019 decreased RM9 to RM2,290 a tonne.
Weekly turnover slipped to 62,396 lots from 112,366 lots, while open interest decreased to 208,815 contracts versus 215,476 contracts.
On the physical market, February South was RM10 higher at RM2,190 a tonne from RM2,180 a tonne. - Bernama