KUALA LUMPUR: Bursa Malaysia is expected to extend its downward momentum, in line with regional peers on the back of multi-year low Asian currencies, China-Japan currency war and the impending US rate hike.
Affin Hwang Investment Bank vice-president and head of Retail Research Datuk Dr Nazri Khan Adam Khan said that local stocks had finally breached the crucial 1,600-point psychological level and is now set to trend lower.
The FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to continue its downtrend towards the next major support levels of 1,570, 1,530 and 1,500, he told Bernama.
This is mainly due to China’s yuan volatility, the softer ringgit, fall in commodities prices and the growing signs for interest rates hike by the US Federal Reserve.
China in a surprise move had devalued its currency on Tuesday last week by almost two per cent and the yuan continued to depreciate in the following days.
Nazri Khan said calmer conditions prevailed in the global markets after the People’s Bank of China sought to soothe some of the anxieties sparked by the rapid depreciation of the yuan.
“Despite that, we expect more negative reactions as the currency war escalates between China and Japan and the impending interest rate hike in the US early next month,” he said.
Last week, Bursa Malaysia closed mostly lower except on Thursday following the announcement of Malaysia’s encouraging gross domestic product (GDP) growth for the second quarter, which provided a fillip for the bourse.
Nazri Khan said considering the GDP growth of 4.9 per cent, Bank Negara’s reiteration that it would not peg the ringgit and or introduce capital controls would sooth investors sentiment and help support the market.
In addition, he said the increase in the country’s natural rubber production in June 2015 by 36.8 per cent and productivity by 41.4 per cent augured well for Malaysia’s current account surplus as this suggested that the falling ringgit would boost commodities export over the medium term.
On a weekly basis, the benchmark FTSE Bursa Malaysia KLCI finished at 1,596, down 85.83 points on extensive selling.
The FBM Emas Index declined 610 points to 10,965.92, the FBMT100 Index decreased 574.84 points to 10,693.43, the FBM 70 eased 633.21 points to 11,773.27 and the FBM Ace depreciated 565.76 points to 5,454.38.
Sector-wise, the Finance Index tumbled 935.63 points to 14282.82, the Plantation Index contracted 233.85 points to 6,993.99 and the Industrial Index dropped 128.75 points to 3,077.
Weekly turnover rose to 10.26 billion units worth RM10.76 billion from last week’s 7.38 billion units worth RM7.99 billion.
Main market volume improved to 5.80 billion units worth RM9.75 billion from 4.57 billion units valued at RM7.35 billion recorded last week.
Warrant turnover increased to 2.70 billion units worth RM644.19 million against 1.15 billion units worth RM277 million previously.
ACE market volume rose to 1.76 billion units valued at RM368.66 million from last week’s 1.64 billion units worth RM352.12 million. — Bernama