Ringgit to extend gains, KLCI to test key 1,700 level

KUALA LUMPUR: The ringgit is expected to extend its upward momentum next week on stronger buying interest following positive global sentiment, said a dealer.


He said the continued increase in oil prices, coupled with expectations of the US Federal Reserve (Fed) putting on hold its rate tightening cycle in 2019, would improved risk appetite and boost demand.

“The dovish Fed Open Market Committee meeting minutes have also triggered the weakness in the US dollar, which worked in favour of the local note.

“The current sentiment for the ringgit is positive. With the US dollar declining and the optimism that the US and China may soon resolve their trade dispute, the local note could rise further,” he told Bernama.

He said the ringgit would likely appreciate between 4.06 and 4.08.

Meanwhile, Oanda Head of Trading Asia-Pacific Stephen Innes expects the ringgit to trade at the 4.09 level, supported by the bond market which would be issued soon.

“Malaysia will soon issue Samurai bond (a yen-denominated bond issued in Tokyo by a non-Japanese entity) and the added money is a welcome boost to the government coffers,” he said.

Finance Minister Lim Guan Eng was reported as saying that the government would name bankers to arrange a ¥200 billion Samurai bond sale next week.

On a Friday-to-Friday basis, the local note strengthened to 4.0940/0980 from 4.1340/1370 against the greenback.

It went up against the Singapore dollar to 3.0297/0338 from 3.0357/0395 and improved against the British pound to 5.2203/2270 versus 5.2378/2432.

Against the Japanese yen, the ringgit jumped to 3.7785/7832 from 3.8260/8298 but eased against the euro to 4.7155/7217 from 4.7144/7199.

Meanwhile the FBM KLCI is likely to test the resistance level of 1,700-point next week with outlook hinges upon progress of the trade discussion between the US and China.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said remarks from the two world's largest economies would be closely scrutinised in the run-up to their meeting at the end of the month.

According to news reports, Chinese Vice-Premier Liu He would likely visit Washington on Jan 30 and 31 for further trade talks.

"Based on the interest rate futures, it appears that the market has been expecting no hike in the Federal Fund rate this year. Therefore, should the positive sentiment continues, the FBM KLCI might increase towards the resistance level of 1,700 points.

“However, technical indicators such as stochastic is lingering at overbought position. This signals the FBM KLCI is still fragile in the immediate terms," he told Bernama.

For the week just ended, the FBM KLCI was traded mostly higher, mainly influenced by external factors such as US Federal Reserve's dovish stance on interest rate hikes and the potential US-China trade negotiations.

On a Friday-to-Friday basis, the benchmark FBM KLCI settled 13.44 points higher at 1,683.22.

The FBM Emas Index appreciated 205.01 points to 11,618.03, the FBMT100 Index increased 177.88 points to 11,501.22, the FBM 70 soared 567.58 points to 13,591.38, the FBM Emas Shariah Index improved 210.56 points to 11,567.47, and the FBM Ace expanded 163.67 points to 4,458.10.

Sector-wise, the Finance Index bagged 173.84 points to 17,415.63, the Industrial Products and Services Index eased 0.76 of-a-point to 164.87, while the Plantation Index was 236.74 points higher at 7,117.64.

On a Friday-to-Friday, the weekly turnover almost doubled to 14.17 billion units worth RM11.30 billion against 7.22 billion units worth RM4.79 billion.

Main Market volume increased to 10.41 billion units valued at RM10.59 billion versus 5.17 billion units valued at RM4.37 billion. Warrants turnover advanced to 1.90 billion units worth RM368.88 million from 1.23 billion units worth RM282.94 million.

The ACE Market volume appreciated to 1.85 billion shares valued at RM341.04 million against 719.60 billion shares valued at RM127.20 million

The crude palm oil (CPO) futures contract on Bursa Malaysia Derivatives is expected to trade range-bound next week as the country's stockpile hit its highest in history at 3.22 million tonnes with prices likely to move between RM2,000 and RM2,020 a tonne, a dealer said.

InterbandGroup of Companies senior palm oil trader Jim Teh said this was a challenge for traders in reducing inventory.

The Malaysian Palm Oil Board (MPOB) in its “Performance of the Malaysian Palm Oil Industry for the Month of December 2018” released on Thursday, stated that the total palm oil stocks during the month rose 6.92 per cent to a record high of 3.22 million tonnes from 3.01 million tonnes in November.

CPO stocks increased 8.4 per cent to 1.94 million tonnes in December from 1.79 million tonnes in the preceding month, while CPO production fell 2.02 per cent to 1.81 million tonnes from 1.85 million tonnes previously.

The MPOB said palm oil exports improved 0.57 per cent to 1.383 million tonnes in December from 1.375 million tonnes in November, while exports of oleochemicals rose 2.75 per cent to 253,941 tonnes from 247,135 tonnes.

“We're hoping that buyers from China would appear as the Chinese New Year is around the corner (Feb 5-6),” he told Bernama.

“Volatile oil prices and optimism from the US and China trade talks last Wednesday, would play a part in the macroeconomic environment which affects markets,” said Teh.

For the week just ended, CPO futures prices were traded mostly higher.

On a Friday-to-Friday basis, January 2019 and February 2019 rose RM3 each to RM2,093 a tonne and RM2,123 a tonne, respectively, March 2019 soared RM200 to RM2,171 a tonne, and April 2019 grew RM17 to RM2,211 a tonne.

Weekly turnover improved to 140,325 lots from 109,007 lots last Friday, while open interest stood at 222,707 contracts from 255,104 contracts last week.

On the physical market, January South eased RM30 to RM2,060 a tonne.. - Bernama