Investors still nervy despite strong GDP

Malaysia posted the highest quarterly growth in 3Q17, rising to 6.2% — the highest in 3 years


The local equity market has not run away after the impressive third-quarter (3Q) growth, as worries over interest- rate hikes and the property glut impact dampered sentiments.

Malaysia posted the highest quarterly growth in the 3Q of this year (3Q17), rising to 6.2% — the highest in three years.

However, the positive sentiment was short-lived as investors were scurrying to find reasons to invest in the local bourse.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) opened higher yesterday, but the index later slipped into negative territory.

The index opened 2.11 points stronger at 1,723.77 yesterday, before adding 3.19 points to 1,724.85 from last Friday’s close of 1,721.66.

However, it closed 3.3 points lower at 1,718.36 at the end of yesterday’s trade.

For this year, the index had gained 4.67% and 9.07% for the last 12 months, according to Bloomberg figures.

Much of the recovery is boosted by the better financial performance of key index-linked companies and overall market sentiments after a disappointing 2016.

Affin Hwang Investment Bank Bhd senior director and head of equity capital markets Arvin Chia Yew Kim said the market has shrugged off the stunning gross domestic product (GDP) performance and now is more concerned over the looming uncertainties.

“Bank Negara Malaysia (BNM) is hinting on the possible hike in the interest rate next year and this seems to be affecting investors’ sentiments,” Chia told The Malaysian Reserve (TMR).

Higher GDP and rising inflation have prompted speculation of interest- rate hikes from the present 3%.

Central banks have used interest rates to curb rising inflation and manage spending.

Some analysts expect the interest- rate hike will happen in 1Q18, and an addit ional hike is not dismissed.

Rakuten Trade Sdn Bhd research VP Vincent Lau said the local bourse was slipping lower due to external factors — despite a decent boost following the encouraging GDP data.

“Last Friday, the market was gathering momentum, and there was a catalyst to provide the boost to the benchmark index and the overall market.

“However, the gains did not seem to last and the local bourse was declining despite the positive GDP results, the ringgit’s strengthening and improving oil price,” Lau told TMR.

He said the foreign selling of Malaysian equities on Bursa Malaysia, the impending US Federal Reserve hike, and China’s sluggish economic data were among the other factors that continue to dampen investors’ sentiments.

Prior to the 3Q17 GDP results, the FBM KLCI was at 1,722 points. But that level was far lower than the 1,796.75 level reached in June.

Meanwhile, MIDF Research said it is noteworthy that the FBM KLCI was up by 3.55 points on the day the GDP results were announced.

“The boost was not just driven by the stronger GDP data, but due to the overnight rally on the Wall Street, spurred by solid quarterly earnings of Wal-Mart Stores Inc.

“The ringgit, meanwhile, appreciated 0.74% for the week to US dollar/ RM4.161, the highest level in more than a year,” said the research house.

The central bank’s warning of the country’s property glut may have also spooked investors. “Property overhang cautioned by BNM has diminished sentiments,” Lau said.

Last week, BNM said the country was facing a residential property glut with unsold properties reaching the highest level in a decade.

“The news on the the property glut seems to be affecting sentiments,” Chia said.

BNM said most of the unsold units are priced at RM250,000 and above, beyond the purchasing power of most Malaysians.

“There were 130,690 unsold units at the end of March this year, with 83% priced at above RM250,000. “Also, 61% of the unsold units are high-rise apartments,” it said.