KUALA LUMPUR: Bursa Malaysia’s benchmark index is expected to remain cautious this week, with investor sentiment likely to be shaped by the US Federal Reserve’s latest policy decision, developments in West Asia, oil prices and shifts in US interest-rate expectations.
IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said higher oil prices and geopolitical uncertainty could keep inflation expectations elevated, while shifts in US interest-rate expectations may continue to influence global bond yields, the US dollar and emerging-market flows.
“Against this backdrop, we expect investor positioning in Bursa Malaysia to remain relatively defensive, with greater interest in sectors offering more resilient earnings and domestic or commodity-linked exposure.
“The market’s defensive characteristics could provide some insulation from weakness in technology-heavy regional indices, particularly if higher oil prices continue to pressure global risk appetite,” he told Bernama.
Rakuten Trade Sdn Bhd vice-president of equity research Thong Pak Leng expects the benchmark index to remain in consolidation this week, with scope for a technical rebound should oil prices and US Treasury yields continue to ease.
“The sharp correction has brought valuations to more attractive levels, which could encourage local institutions and bargain hunters to gradually rebuild positions in selected blue chips.
“However, persistent foreign selling, a strong US dollar and expectations of further US monetary tightening are likely to cap the upside,” he said.
As such, Thong expects the benchmark index to trade within the 1,650-1,680 range this week, with a sustained move above 1,675-1,680 needed to restore stronger upward momentum.
US interest rates were raised for the first time in more than three years to 3.75% to 4%, from 3.5% to 3.75%, while the Bank of Japan upped its policy rate to 1.25% last Friday, its highest level in 31 years.
Brent crude oil, which settled at US$105.68 a barrel last Monday, eased 1.93% to US$102.80 as at 6.50pm last Friday.
On a Friday-to-Friday basis, the FBM KLCI fell 21.18 points to 1,665.56 at last Friday’s close, from 1,686.74 a week earlier.
