Bursa Malaysia rally driven by TNB and Budget 2018

At close, the FBM KLCI rose 9.33 points to end at 1,746.13 last Friday


The FTSE Bursa Malaysia KLCI (FBM KLCI) rose last Friday as a key component of the index, Tenaga Nasional Bhd (TNB) rose to a historic high as investors reacted positively to Budget 2018.

After opening 4.54 points higher to 1,741.34 in the morning, the index moved between 1,739.89 and 1,751.5 throughout the day.

At close, the FBM KLCI rose 9.33 points to end at 1,746.13 compared to last Thursday’s close of 1,736.8.

The 30-stock benchmark was at its best since it fell below the 1,750 psychological level on Oct 17, 2017, according to Bloomberg data.

Rakuten Trade Sdn Bhd research VP Vincent Lau said the pre-budget rally was propelled by TNB share price rise.

“TNB brought the FBM KLCI higher on the back of the news of its high dividend payout and new dividend policy,” he told The Malaysian Reserve.

TNB, which lead the heavyweights, pushed the FBM KLCI 5.7 points higher to close the day at RM14.96. The share of the power company rose to as high as RM15.46, a record high for the government-linked company (GLC).

Lau said the sentiment on TNB was positive after it announced a record dividend payout of RM3.5 billion.

Analysts are also urging for a ‘Buy’ call on the utility company. It is currently trading at 12.5 times, trailing 12-month earnings per share and 12 times its estimates for next year.

Other counters that added points to last Friday’s rally are Axiata Group Bhd, which rose seven sen to RM5.34, and Sime Darby Bhd, which gained nine sen to RM9.17.

Maxis Communications Bhd rose seven sen to RM5.89 while DiGi.com Bhd added seven sen to RM4.95.

“While TNB and the budget announcement were the catalysts for the positive sentiments last Friday, other banking stocks and GLCs did provide FBM KLCI the support and push,” Lau said.

Market breadth was overall positive as gainers outpaced losers by 511 to 344, with 399 counters unchanged, 621 not traded and 106 others suspended.

Decliners were led by Genting Malaysia Bhd that lost 11 sen to RM5.02, while Genting Group dropped nine sen to RM9.24. British American Tobacco (M) Bhd also slid 28 sen to RM40.50.

Volume rose to 2.76 billion worth RM2.66 billion from 2.53 billion units worth RM2.13 billion last Thursday.

Lau remains mildly positive on Budget 2018, as it is indeed an election budget.

“Credit is given to the overall budget that is fiscally responsible and encouraging.

“The next thing that would push the market into a rally would be the upcoming results season, but a key catalyst would still be the election that would drive the market higher,” he said.

Lau said there are possibilities for the market to rise or stage a mini rally the week after the budget announcement.

“This is the usual budget effect and now the FBM KLCI has technically broken out of the recent bearish downtrend,” he said.

In Budget 2018, the government will continue to invigorate sustainable and responsible investment (SRI).

Prime Minister Datuk Seri Mohd Najib Razak said the income tax exemption for recipients of the special green SRI sukuk grant will total RM6 million.

“Income tax exemption on income from management fee is to be expanded to approved conventional SRI fund managers from years of assessment 2018 to 2020,” he said.