RHB: Market volatility temporary

The volatility in the FBM KLCI has more to do with external factors, says MD


The bearish sentiment on Bursa Malaysia is a temporary phase rather than a sustained secular downtrend, according to RHB Bank Bhd.

Its group MD Datuk Khairussaleh Ramli said the volatility in the FTSE Bursa Malaysia KLCI (FBM KLCI) has more to do with external factors.

“We actually have a positive outlook on the index as our fundamentals are strong. External factors are causing the volatility,” he told reporters at the launch of the bank’s new mobile banking application in Kuala Lumpur yesterday.

Khairussaleh added that Malaysia has sturdy foreign-exchange (forex) reserves, given the current account is still in surplus, while energy prices are well supported and inflation remains low.

The US-China trade issues and raising of weightings of Chinese stocks on global indices have led to an outflow of funds from Bursa Malaysia, which is down 4.2% year-to-date.

The participants of the benchmark index have been particularly hit by weaker economic data and disappointing fourth-quarter earnings, which have triggered an outflow of foreign funds on expectations the local economy and corporate earnings are set to slow in the first half of 2019.

While the FBM KLCI Futures is on a downtrend, money has been channelled into mid-cap stocks with the benchmark FTSE ML 70 Index rising by some 10% to 14,306 points over the same period.

Khairussaleh said the RHB banking group’s investment banking arm continues to cover a wide variety of counters and advise investors to invest in stocks that offer value opportunities.

On Malaysia’s potential exclusion from the global bond indices like the FTSE World Government Bond Index (WGBI), Khairussaleh said the banking group remains positive on the depth of the country’s bond market.

“Malaysia’s bond market is deep and its fundamentals are sound, plus it is a mere speculation, so we are not too worried,” he added.

RHB group treasury head for rates/forex strategy Suresh Ramanathan and senior analyst Jia Wen Quek said the recent ringgit sell-off has been overdone due to panic selling.

In a research note, they attributed the sell-off to the recent two headlines, namely Norges Bank’s announcement on slashing of emerging-market bonds in early April and FTSE Russell’s announcement that it may drop Malaysian debt from its FTSE WGBI on accessibility and liquidity concerns.

“This has disproportionately hit Malaysian assets, with the ringgit against the US dollar touching an intraday high of 4.1455, short of the psychological 4.15 handle.

“We hold the view that markets panicked and overreacted to the news,” their research note yesterday stated, adding that removing Malaysia from the index will not impact the country’s fundamentals and credit ratings.

RHB believes the medium-term outlook of Malaysian bonds remains intact and should eventually drive foreign inflows into the space.

Suresh and Jia noted that Malaysia’s defences against external volatility have strengthened in recent years on improved mix of external debts, robust domestic forex markets for trading and hedging, consistent current account surplus and sufficient foreign reserves as recommended by the International Monetary Fund.

RHB’s newly launched mobile banking app aims to acquire one million customers by the end of this year.

The app will coexist with the current RHB Now app and Internet banking platform over the next 12 months, before gradually integrated to a single platform.

At present, the bank has 1.8 million active RHB Now Internet banking users, of which more than 500,000 are active mobile banking users.

“In the last three years, our mobile banking penetration has grown by 250%.

“This new mobile banking app is set to increase transaction volume via digital channels from 66% now to more than 80% by 2022,” Khairussaleh said.