Bursa bounces from the bottom

Bursa bounce

KUALA LUMPUR: Stocks on Bursa Malaysia posted its biggest two-day rally since the start of the year, with the FBM KLCI recovering more than half of its losses from a selldown that started on March 3.

The bounce from the bottom was in line with the regional stock markets, which saw a rebound after the recent rout led by the selldown in China and Hong Kong’s technology stocks.

Some market observers reckoned that the market has already priced in almost all the risks, and that the global economy is on track to accelerate on reopening from the Covid-19 pandemic.

The local stock market also took a bullish turn after the United States Federal Reserve (Fed) painted a more rosy prospect for its economic growth this year as the Fed raised interest rates for the first time since 2018.

“Despite the current uncertainties, we believe the market has already priced in the negative news.

“More economies are opening up this year – that should be the main focus.“Back in Malaysia, the country is reopening its borders to international visitors starting next month, which will boost sectors like tourism and services,” Rakuten Trade head of equity sales Vincent Lau told StarBiz.

“More economies are opening up this year – that should be the main focus.

“Back in Malaysia, the country is reopening its borders to international visitors starting next month, which will boost sectors like tourism and services,” Rakuten Trade head of equity sales Vincent Lau told StarBiz.

Malaysia is transitioning to a Covid-19 endemic phase to boost its economy, which has been affected by the virus for the past two years.

The government expects economic growth of 5.5% to 6.5% this year, compared to 3.1% in 2021.

Lau said while the rise in commodity prices remains a boon for Malaysia, prices are expected to moderate in the second half of this year.

“We expect Brent crude oil will moderate to US$80-US$90 (RM335.64-RM377.60) per barrel, which is a good level for the economy and for oil producers like Petronas to continue to ramp up their capital expenditure spending,” he said.

Yesterday, the FBM KLCI, which tracks 30 of the biggest companies on Bursa Malaysia, closed 19.56 points higher, or up 1.24%, to 1,590.88 points, led by banking stocks.

While the gains were welcomed, volatility will remain as fears persist on any slowdown in the opening up of economies and as the Russian invasion of Ukraine continues.

Areca Capital Sdn Bhd chief executive officer Danny Wong pointed out that the recent selldown in the market has also resulted in value emerging.

Areca Capital's Danny Wong

“The market selldown was reflective of the market sentiment.

“The fundamentals remain intact as more economic activities are opening up and the recent selldown has created buying opportunities, especially in technology stocks,” he said.

Technology counters around the world including Malaysia came under selling pressure, partly due to the uncertainty surrounding the rate hike.

When asked if the recent rally in the market will continue, Wong said it depends on the upcoming corporate results and how the reopening of the economy will take place this year.

“Technology stocks have shown consistent growth over the past two years despite the Covid-19 pandemic. We expect the sector to maintain its performance this year,” he said.

Yesterday, the Fed announced its first interest-rate hike of 25 basis points to 0.5%, and signalled there would more hikes this year.

“The market was positive on the news because the Fed finally made it official, there were no surprises.

“The Fed raising rates means a vote of confidence that the central bank is more concerned about inflationary pressure and that the economic growth remains intact,” Wong said.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the Fed’s decisions would set the tone for many central banks across the globe, including Malaysia.

“However, the timing may not necessarily be in lockstep with the United States, as Bank Negara may want to consider the domestic factors such as our recovery strength, in particular the labour market and income growth, as well as inflationary pressures.

“The Malaysian economy is in good traction with respect to recovery and with more reopening, economic activities could be further accelerated,” he said.

He expects Bank Negara to raise the overnight policy rate (OPR) by 25 basis points from 1.75% in the second half of this year.

Earlier this month, the central bank announced it is maintaining its OPR at 1.75% and expects core inflation to be modest.

The interest rate has stayed at an all-time low of 1.75% since July 7, 2020, after it was cut from 2% to provide additional policy stimulus in light of the Covid-19 pandemic.