Bursa Malaysia concludes 2017 on good note

Dec 30, 2017

KUALA LUMPUR: Bursa Malaysia concludes 2017 on a relatively good note with positive aspects such as the stabilisation of crude oil prices, firmer ringgit, positive economic data and higher foreign fund inflow, lending support to the key index.

The FBM KLCI finished at a year high of 1,796.81 on Dec 29, up 155.08 points, or 9.45 per cent, from 1,641.73 at end-2016.

The year saw 14 initial public offerings compared to 12 the previous year.

A new board — Leading Entrepreneur Accelerator Platform (Leap) Market – was launched on July 26 to provide small and medium enterprises with an alternative and efficient fund-raising platform and visibility through the capital market.

As at Dec 31, two companies were listed on the new trading platform.

Tracking the movement of the key index during the year globally, the market barometer was influenced by the three increases in the United States (US) interest rates, geopolitical tensions between the US and North Korea, uncertainties surrounding US President Donald Trump’s tax reform and Wall Street performance.

Locally, speculation on an early 14th general election (GE14) has caused some impacts on the market barometer movement.

For the whole year, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was traded between 1,616.54 and (1,796.81) against between 1,600 and 1,727.99 in 2016.

Although the first trading day on Jan 2 registered the lowest reading of the year at 1,616.54, the key indicator somehow kicked off the year thereafter on a positive note, fuelled by the stronger crude oil prices and ringgit.

On Jan 2, benchmark Brent crude oil improved to over US$55 per barrel due to the Organisation of the Petroleum Exporting Countries’ (OPEC) output cut which came into effect on Jan 1, along with the stronger ringgit which was quoted at RM4.4873 against the greenback.

The market barometer continued its uptrend thereafter, touching an intraday high of 1,796.75 on June 16, after the US Federal Reserve (Fed) raised interest rates for the second time of the year on June 14.

The Fed increased the interest rates three times in 2017, raising from a range of 0.75-1.00 per cent on March 15, 1.00-1.25 per cent (June 14), and 1.25-1.50 per cent (Dec 13), and all the increases casting positive spillover effects on the the local bourse.

According to MIDF Research, foreigners had built a solid position on Bursa Malaysia in the first half of 2017 which saw the cumulative foreign buying on the local bourse surged substantially to RM10.2 billion in the same period, registering the highest among Southeast Asian peers.

However, the local bourse began to retreat to 1,759.93 on July 7 after touching the peak level on June 16, mainly weighed by profit-taking and weaker crude oil prices with Brent crude falling to between US$45.61 and US$46.47 per barrel during the period.

But the key index rebounded to close at 1,761.99 on July 24 when Brent crude climbed to US$48.18 a barrel, ahead of the talks between OPEC and non-OPEC members on further crude oil production cut.

A slew of better-than-expected economic data, such as gross domestic product growths of 5.6 per cent and 5.8 per cent for the first and second quarters of the year, respectively, continued to lift the local bourse and pushed it to hit the second highest closing point of the year of 1,782.74 on Sept 11.

However, global equity markets, including Bursa Malaysia were affected by the geopolitical tension between the US and North Korea following the latter’s missile launches in September and November.

The heightened US-North Korea geopolitical tensions dragged Bursa Malaysia to close at 1,765.59 on Sept 26 and further slumped to 1,717.23 on Nov 24.

Bank Negara Malaysia said in its Third Quarter (3Q) Bulletin that the FBM KLCI declined 0.5 per cent to close at 1,755.6 points as at end-September, mainly due to net selling activities by foreign investors.

“This was the result of cautious investor sentiment that was driven by external factors, including heightened geopolitical concerns and uncertainties surrounding US monetary policy and political developments,” it said.

Nonetheless, the fall was capped by positive sentiment brought by Budget 2018 announcement on Oct 27, which saw the KLCI rebounded to close at 1,746.13.

In November, double whammy — the US President Donald Trump’s tax reform plans and North Korea’s second missile launch — hammered the KLCI, causing it to slide below the support level of 1,740 and traded between 1,737.9 and 1,719.47 from Nov 13 to Dec 11.

However, bullish sentiment on Wall Street with the Dow Jones industrial average (DJIA) projected to approach 25,000 by year-end lifted the local bourse to finish at 1,729.57 on Dec 12.

The uptrend continued and saw the key index surpassed the level of 1,750 to end at 1,759 on Dec 14 and close at 1,760 on Dec 22 due to year-end window dressing and improved Brent crude oil price which traded at US$64.90 per barrel.

On Dec 29, Bursa Malaysia ended the year’s trading with a big bang as the KLCI hit a year’s high of 1,796.81 points, supported by both local and foreign funds buying towards market closing time, amid the strengthening ringgit which surged to the highest level of the year to 4.045 against the US dollar at 5pm.

According to Bursa Malaysia’s website, in November 2017, foreign institutions accounted for 7.91 per cent of the stock volume transacted during the month versus 12.12 per cent in the same period last year, while local institutions constituted 24.88 per cent, up from 22.01 per cent in November last year.

MIDF Research, in its weekly note, said that as of Dec 18, the fourth week of foreign inflows brought the year to-date foreign purchase above the RM10 billion mark at RM10.2 billion, the level last seen in the third week of September this year.

Rakuten Trade Sdn Bhd Research Vice-President Vincent Lau concluded that technology, gloves, as well as small and middle capitalised stocks were the top best performed index on Bursa Malaysia in 2017, while the least performed stocks were oil and gas, property and telecommunication-related counters.

“Moving forward where the GE14 must be called in 2018, we expect the local equity market to stage rally post GE14 and the KLCI to hit 1,910 next year, supported by improving corporate earnings which is likely to grow 6.6 per cent.

“We advocate investors to look at fundamentally sound small-cap companies such as HSS Engineers Bhd, KUB Malaysia Bhd, Ahmad Zaki Resources Bhd, Straits Inter Logistic Bhd, Kelington Group Bhd, and Perak Transit Bhd,” he told Bernama recently. –Bernama


(US$1 = RM4.06)