Rakuten Trade's Lau is optimistic the index will hit 1,700 points by year-end.
PETALING JAYA: While the current respite in Asian markets might be short-lived, strong domestic fundamentals and US pro-business agenda will provide support for markets going forward, according to analysts.
Asian markets and currencies mostly experienced modest gains following reports that US President Donald Trump is adopting a less aggressive approach on tariffs than previously expected.
Notably, Trump has held off immediate tariffs against China, signalling a potential for more negotiations with Beijing.
In China, Hong Kong’s Hang Seng Index was among the top performers as it ended higher by 0.91% at 20,106.55. Mainland China’s CSI 300 Index rose 0.08% to end the day at 3832.61. The Shenzhen Stock Exchange advanced 0.48% to touch 10,305.69 points.
Japan’s Nikkei 225 ended higher by 0.32% at 39,027.98 and Taiwan’s Taiex also closed up higher by 0.14% to 23,300.01.
Meanwhile, India’s Nifty 50 edged downwards by 1.37% to 23,024.65. Singapore’s Straits Times closed down 0.33% at 3,795.37. South Korea’s Kospi declined marginally by 0.08% to 2,518.03.
Rakuten Trade head of equity sales Vincent Lau said Trump’s pro-business agenda would augur well for regional markets and China compared with the hardline stance adopted by the Biden administration.“Trump’s business-friendly approach has sparked a relief rally seen across global markets. There is room for negotiations with Trump to achieve a win-win situation with other economies unlike Biden.
“Hence, while the reprieve in markets may be short-lived, any expected reversal in gains is not likely to be severe and will be manageable,” he told StarBiz.
According to Lau, Trump’s business-friendly stance was a main upside for the FBM KLCI which saw a slight uptick of 0.52% to end at 1,580.46 points yesterday.
He is optimistic that the index will hit 1,700 points by year-end, and recover to the 1,600 levels in the near term.
“The selling pressure on FBM KLCI is likely over and it has bottomed out. In my view, it is time for investors to consider buying at the current levels,” he said.
The ringgit appreciated to 4.4730/4780 versus the greenback at 6pm yesterday from Monday’s close of 4.4910/4960.
Apex Securities Bhd head of research Kenneth Leong expected the ringgit’s strength against the US dollar to be sustainable.
“The upcoming tariffs will safeguard the strength of the dollar and that may cap the potential recovery of the ringgit. Should there be a delay in rate cuts by the US Federal Reserve (Fed), the dollar could remain elevated,” Leong said.
The Fed is expected to hold off rate cuts during the upcoming Federal Open Market Committee on Jan 29 and interest rates will likely hold steady at their current level of 4.25% to 4.5%.
Analysts expected the first rate cut in March or May if inflation figures continue to improve.
Trump’s anticipated inflationary trade policies as well as expected lower rate cuts by the Fed had propped up the dollar. Since last October, the US Dollar Index has risen by 8%.
SPI Asset Management managing director Stephen Innes said from a broader economic and monetary policy perspective, the dollar remained a reliable refuge.
“I am bearish on bonds. I foresee the US 10-year Treasury yields potentially breaking above 5% later this year.
“The dollar’s strength is backed by this anticipation, supported by a robust carry, making it a viable hold, at least for the short term,” he said.
Leong expected foreign funds to shy away from Asian markets until there are clearer developments regarding the tariffs.
Nevertheless, the narrowing yield differential between the United States and Malaysia, along with improving economic fundamentals in Malaysia, healthy employment data as well as the gradual rise in wages are expected to provide support for the ringgit.
“Our in-house year-end 2025 target for the ringgit is at 4.35 – based on the aforementioned presumptions,” he said.