PETALING JAYA, 18 November 2019 – The stock market outlook in Malaysia is expected to be bright this year, according to Rakuten Trade Sdn Bhd. Head of research Kenny Yee, there were signs indicative of a positive direction as the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to reach 1,630 points by end of 2019 and improve to 1,750 points in 2020.
Rakuten Trade predicts the ringgit to hover between 4.10/15 against the US dollar this year and will strengthen to 4.00 in 2020. According to Yee, stable interest rates will play a crucial role in attracting foreign funds, making a positive impact on both ringgit and equities.
Yee added that both factors, attractive ringgit and reasonable market valuations, should limit downside risks in ringgit-denominated assets.
He also added that as long as Bank Negara Malaysia maintains the interest rate, the yield will be high, which would induce the inflow of foreign funds which would spill over to the equities, thus benefiting both equities and foreign exchange.
“Malaysia is not interest-rate sensitive, unlike our neighbouring countries such as Indonesia, Thailand or the Philippines. Thailand has a large sum of money inflows in the country which is why it has to address its interest rate to push out some of the inflows, otherwise it would have an impact on its currency, similar to the Asian financial crisis in 1998” said Yee.
Having reduced rates 3 times this year, the Federal Reserves indicated that there will no longer be a cut for 2019, thus putting more stability on both forex and equity markets. However, US and China are still discussing on tariffs with no outcome over the immediate item. It is concluded that this protracted delay will add to market volatility.