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KUALA LUMPUR – Bursa Malaysia is expected to be range-bound next week as investor sentiment is likely to remain cautious due to market volatility, a dealer said.
Rakuten Trade Sdn Bhd vice-president of equity research Thong Pak Leng said foreign funds are expected to continue accumulating local stocks to take advantage of the low valuations against regional peers.
“As such we expect the FTSE Bursa Malaysia KLCI (FBM KLCI) to trend range-bound and hover within the 1,600-1,620 range for next week with immediate resistance at 1,618 and support at 1,570,” he said.
For the week just ended, the FBM KLCI traded mostly lower amid heightened market volatility in the region while tracking the movements on Wall Street and escalating tensions due to the conflict in Ukraine.
In another development, Bank Negara Malaysia (BNM) decided to hold the Overnight Policy Rate (OPR) at 1.75% on Thursday.
The central bank said the overall recovery trajectory remained on track despite the recent moderation in economic activity due to the Omicron-driven Covid-19 resurgences.
On a Friday-to-Friday basis, the FBM KLCI rose 12.22 points to end the week at 1,603.94 from 1,591.72 in the previous week.
On a separate development, the ringgit is expected to continue its uptrend amid cautious sentiment due to global geopolitical tensions, trading between RM4.17 and RM4.18 against the US dollar next week, said an economist.
The focus will remain centered on the war in Ukraine next week, said Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid.
“Further appreciation is somewhat limited given that the balance of risks is still tilted on downside risks, paving the way for the demand of safe-haven currencies,” he said.
“While the military conflict in Ukraine is extremely concerning, the sharp rise in commodity prices such as the Brent crude and crude palm oil has been music to our ears.”
Back home, investors are expected to remain positive over the decision by BNM to maintain the OPR.
OCBC Bank reckons that the Malaysian central bank can afford to have more space in hewing close to its historic-low policy rate of 1.75% for longer than its peers amid rising crude oil prices.
The bank’s economist Wellian Wiranto said Malaysia’s current account surplus status is likely to be bolstered further by the recent ballistic move in commodity prices as the country is among the few net commodity exporters in the region.
“That will leave it less vulnerable than others to US Federal Reserve’s fund hikes,” he said in a research note.
While keeping the OPR unchanged, the Malaysian central bank has continued to note downside risks to growth, with the Russia-Ukraine situation constituting “a key risk” to growth and trade trajectories, alongside shocks to commodity prices and supplies.
“One can argue that BNM is inching, however slowly, towards nudging its policy rate up, with the potential inflation uptick in mind. Still, we caution against reading too much into it and any rate hike is likely to remain some months (away),” said Wiranto.
Economists expect BNM to raise its interest rate in the third quarter this year by 25 basis points.
On a weekly basis, the ringgit registered at 4.1760/1795 against the greenback from 4.2005/2040 a week ago.
The local currency also traded higher against other major currencies on a Friday-to-Friday basis.
The ringgit appreciated against the Singapore dollar at 3.0715/0745 from 3.1016/1044 a week earlier, went up against the British pound at 5.5558/5604 from 5.6177/6224, and strengthened versus the euro at 4.5994/6033 from 4.6966/7005.
Against the Japanese yen, it rose to 3.6178/6211 from 3.6422/6455. – Bernama, March 5, 2022