REVIEW: World markets held their breath once again as the US and China attempted once more to hammer out their trade difference at a meeting scheduled for Thursday and Friday.
At the time of writing, following the end of the scheduled trade talks but short of any official announcements, news reports citing sources say the negotiations have once again hit a brick wall with American and Chinese delegates unable to come to agreement on key issues.
The reports contrasted with comments from the White House that real progress was being made.
The goal of the negotiations, more than to prevent another round of tariff increases, is to undo the damage of additional tariffs already imposed.
Short of a resolution, a 10% tariff on Chinese goods i.e. the status quo would signal a failure in negotiations.
Meanwhile, the White House press secretary announced that US President Donald Trump was close to signing a compromise on spending for a southern border wall although he intended to declare a national emergency to allocate funding to the measure.
For the past week on Bursa Malaysia, investors could be seen growing weary of the speculation.
The back and forth over the issue of the trade war had lasted nearly a year and fatigued by uncertainty, nothing short of confirmation could break the market out of consolidation mode.
Nevertheless, better-than-expected gross domestic product of 4.7% for the fourth quarter of 2018 that was released on Thursday offered evidence to investors that there was a softer impact to the domestic economy.
This came as a relief, given the market’s performance in previous days that had bucked the regional uptrend, pulling the index back from a loss to a slight gain.
However, the optimism may be short-lived, says RAM Ratings, which suggests the local economy will likely not see a repeat performance in 2019, given the lack of a tax-free period to boost consumer stocks or front-loading by importers ahead of trade tariff hikes.
RAM expects moderation to be slight, by 0.1 percentage points.
After factoring in the developments over the week, the Malaysian market maintained caution by holding fast to its position as it had done in previous weeks. Based on the technical chart, it lay in proximity to the 50-day simple moving average – a fall through that would indicate a return to bearish sentiment.
On the forex market, the ringgit lost some of its recent gains as negative reports on the trade talks came in.
The local currency had seen a return of buying interest as global investors returned to riskier assets, but slipped 0.4% yesterday to 4.09.
Yesterday, the FBM KLCI slid along with regional markets as investors surrendered the notion that any meaningful progress would be made in Beijing, ending the week 0.23 points lower at 1,688.83.
The letdown of the trade talks also lent a sour taste to regional markets, which had extended its January rally in the post-Chinese New Year period.
Over the festive period, lunar new year retail sales in China had come in higher compared to the previous year, suggesting that there remained consumer spending power despite evidence of a slowing economy.
Concomitantly, preparatory talks had begun in Beijing between US and Chinese administrators to pave the way for smoother talks come Thursday.
The Shanghai Composite Index had surged 1.2% on Monday and continued to push higher over the ensuing days.
The advance and rising optimism gave the region’s equity markets some measure of stability with the MSCI Asia Pacific ex-Japan Index hitting 4.5-month highs on Thursday.
The index also achieved a technical high point as it crossed the 200-day simple moving average, which had remained intact since June 2018.
Neverthless, Asian markets returned to a bearish posture yesterday, furthering expectations of further downsides at next week’s open.
Statistics: The major index ended the week 2.31 points, or 0.1%, higher at 1,688.83.
Total turnover for the trading week stood at 14.86 billion shares amounting to RM9.78bil compared with 4.95 billion shares worth RM3.41bil over the Chinese New Year-shortened week.
Outlook: The FBM KLCI stayed little changed over the week as concrete leads are yet to come into play.
With the likelihood of the latest round of trade talks ending with little progress, the index looks set to stay within its consolidation phase with a downside bias.
The technical indicators are mixed, with the slow-stochastic signalling some possible near-term gains while the daily moving average convergence/digergence line suggests a weakening trend.
The resistance level remains at 1,709 while the 50-day simple moving average at 1,680 represents the support.
A cross below the moving average would serve as a negative development, indicating a return to a downtrend.