REVIEW: “Impeachment” was the buzzword of the week, although the shock and awe of potential political upheaval in the US was swiftly analysed, digested and somewhat relegated to the backburner.
There was a dip in Asian markets on Wednesday after the transcript of the US president’s phone call with the Ukrainian president was released, and then again on Friday when a whistleblower complaint alleged the White House attempted to cover up the information.
Political manoeuvres in the US Congress are expected to play out over the coming months but holding hostage the financial markets was the question of whether there was any progress in the Sino-US trade talks.
US President Donald Trump’s comments on the sidelines of the UN General Assembly would lead one to think so, serving as an upward catalyst for global stock markets that would have otherwise been dampened by the Democrats’ challenge to the President.
He told reporters in New York that he foresaw an end to the trade war soon, given that, according to him, China was on the losing end and desperate to make a deal. This came just one day after Trump took a hard-line stance against China while addressing the UN General Assembly, criticising it for “gaming the system”, and sending stocks on a decline.
On the domestic scene, however, the rhetoric surrounding the 15-month trade war was not enough to break Bursa Malaysia out of its tight consolidation channel.
There were domestic matters to attend to initially as the FTSE Russell decision over whether local government bonds would be excluded or kept in the World Government Bond Index had investors fretting. Exclusion from the index would have negative ramifications for the ringgit.
Trading on the FBM KLCI took on a sluggish, uninspired pace. The excitement over price increases in crude oil in the previous week had all but dissipated, and oil and gas counters retreated from the highs achieved during that brief moment.
While tensions remained in the Middle East as the United States, Saudi Arabia and their allies reviewed punishment on wayward Iran, oil prices had by and large gravitated to pre-shock levels. Pending another flare up in the Gulf, the demand outlook on crude prices will swing to the tune of developments in the trade war.
There were three consecutive days of losses on the FBM KLCI from Monday to Wednesday, reaffirming the bearish bias on the market. However, late-session buying on the market on each of these days helped to mitigate losses and suggested that investors were still keen on picking up bargains.
Wednesday’s three-point slip was largely attributed to selling in banks as analyst reports suggested that there could be a further Bank Negara OPR cut this year, owing to inflationary pressures.
On Thursday, a late rebound pulled the index higher by 3.42 points to 1,593, lifted by foreign funds reacting to Trump’s assurances that the trade war will soon be over.
By yesterday morning, it was revealed that the FTSE Russell had decided to keep Malaysia on its watch list, pending an interim review in March. The extended “probation” kept the ringgit on an even keel, if somewhat suppressed. There were expectations Bank Negara’s initiatives to amplify liquidity and accessibility to the ringgit had put the bond market in the clear.
The FBM KLCI ended the week at 1,584.14, representing a four-year closing low.
Statistics: The major index ended the week 13.27 points or 0.8% lower over the previous week, at 1,584.13.41. Total turnover for the four-day trading week stood at 9.89 billion shares amounting to RM7.52bil compared with 10.1 billion shares worth RM8.57bil over the previous four-day week.
Outlook: Over in the news pipeline, the first murmurs over the upcoming Budget 2020 were heard in the form of analyst comments and “wish lists” by industry associations.
Analysts have said there are some expectations of a further Bank Negara OPR cut in November, given inflationary pressures seen in August, although an expansionary budget may help to alleviate the need. Investors are also expected to maintain caution as the geopolitical landscape becomes more tumultuous and headwinds continue to grow.
While there will likely be more uncertainty on the US political scene, developments in the trade war with China pose as the key to future global growth and will remain the focal point of investor attention.
The second week of October is set to be an interesting time as the Sino-US trade talks are expected to take place over Oct 10 and 11, lending further insight into the trading horizon.
At yesterday’s close, the market had closed at its lowest since September 2015, reaffirming the bearish trend on the market.The technical indicators are also giving weak signals with the slow-stochastic in a falling position.
The FBM KLCI continues to move below all the key simple moving averages (SMA), suggesting that there will be further negative pressure until the index hits its support of 1,570.
Further support can be found at 1,550.Resistance, meanwhile, can be found at 1,625 and 1,650, the latter being where the 200-day SMA has descended.
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