Higher commodity prices, trade talk optimism to lift FBM KLCI next week

Good news, Bursa Malaysia would have better days ahead. (Reuters pic)

KUALA LUMPUR: Bursa Malaysia is expected to trade higher next week, hitting the 1,650 level, mainly driven by higher commodities prices and optimism about the ongoing US-China trade talks, which are likely to end in the next few weeks.

Phillip Capital Management Malaysia senior vice-president (investment) Dr Mohd Nazri Khan Adam Khan said global crude oil is currently trading at above US$69 per barrel while crude palm oil is hovering above RM2,100 per tonne.

“Our ringgit is also strengthening to 4.06-4.07 against the US dollar. All this recovery as well as the positive developments coming from the US-China trade talks would further boost the share markets moving forward,” he told Bernama.

Research house Malacca Securities Sdn Bhd echoed a similar view, saying market sentiment remains somewhat positive due to the optimism over the trade spat between the US and China.

“The trade talks between the two largest economic powerhouses are expected to come to an end. Therefore, the near-term positivity should continue to provide some mild near-term impetus for further market gains, potentially heading towards 1,650 points,” it said in a note on Friday.

US President Donald Trump and Chinese Vice Premier Liu He met at the White House on Thursday to negotiate their trade.

Asked on the decision by British Prime Minister Theresa May to request for an extension to leave the European Union (Brexit) to June 30, Mohd Nazri said the decision would allow the United Kingdom to settle down and prepare for a smooth Brexit.

“This would cheer the stock markets all over the world and reduce the uncertainty. Hopefully we won’t see a painful Brexit,” he said.

Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the latest Non Farm Payroll, which rose by 196K in March, suggests the US labour market is still in good shape, allaying fears of a recession following the recent yield curve inversion in US Treasury bonds.

“Additionally, the Conservative and Labour parties in the UK are working together to come up with a Brexit proposal, suggesting a softer deal could be agreed among the UK politicians.

“Against such a backdrop, the FBMKLCI is poised for a higher trajectory after being lacklustre in the past two weeks. There could be values emerging should fears of a US recession continue to subside.

“This is especially true when the discussions between the US and China on a trade deal look quite promising, judging from the recent posture between the two countries this week,” he said.

He added that the FBMKLCI is likely to test its immediate resistance level of 1,653 next week as the index has been in an oversold position for quite some time.

For the week just ended, trading on Bursa Malaysia was mixed, tracking the mixed performance of regional peers, the movement of Wall Street and progress of the US-China trade talks.

On a Friday-to-Friday basis, the benchmark FBM KLCI settled 1.82 points lower at 1,641.81.

The FBM Emas Index was 47.02 points higher at 11,600.86, the FBMT 100 Index increased 30.28 points to 11,437.63 and the FBM Emas Shariah Index jumped 99.40 points to 11,787.46.

The FBM 70 advanced 211.90 points to 14,424.54, but the FBM Ace Index narrowed 16.54 points to 4,815.61.

Sector-wise, the Financial Services Index fell 80.41 points to 16,888.72, the Plantation Index increased 50.44 points to 7,236.55, and the Industrial Products and Services Index inched up 0.61 point to 169.54.

Weekly turnover rose to 13.89 billion units worth RM9.58 billion from 11.73 billion units worth RM9.12 billion recorded last Friday.

Main Market volume appreciated to 10.36 billion shares valued at RM8.83 billion versus 8.1 billion shares valued at RM8.34 billion.

Warrant turnover fell to 1.95 billion units worth RM408.36 million compared with 2.15 billion units worth RM460.75 million.

The ACE Market volume was slightly higher at 1.57 billion shares valued at RM329.20 million against 1.47 billion shares valued at RM315.91 million.