Bursa holds steady as Asian markets face pain of China’s retaliation

Our market has become more ‘resilient’ partly due to it being laggard thus far, says analyst


CHINA’S retaliatory move to raise tariffs on US$60 billion (RM250.2 billion) worth of US exports sent regional markets into a sell-off, but Bursa Malaysia Bhd displayed resilience, closing marginally lower despite a weak start yesterday.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) closed 1.9 points lower at 1,599 after slipping some 29 points in early trading to a 44-month low of 1,572 before bargain-hunting saw the index clawing back almost all of its losses for the day.

Rakuten Trade Sdn Bhd research VP Vincent Lau said the local market could have hit bottom when it traded at the low of 1,572 points.

“The benchmark is attempting to rebound to the psychological 1,600point level and is likely to bounce back.

“Indeed, our market has received lesser impact (from the trade war and spat) or has become more ‘resilient’ partly due to our market being laggard thus far,” he told The Malaysian Reserve.

He expects the global markets will continue to be volatile and dictated by the ongoing newsflow from the US-China trade tensions.

“From a technical perspective, the FBM KLCI has recovered strongly after a knee-jerk reaction at the opening. The FBM70 and the FBMSCAP also recovered strongly and formed bullish hammer candlesticks,” a chartist with a local brokerage said.

The threat of an expansion of the trade war between the two largest world economies continues to cast a dark cloud over markets with investors drawn to take a risk-off approach.

At market close yesterday, Tokyo fell for six consecutive trading days with the benchmark Nikkei 225 Index lost 0.59% or 124.05 points to close at 21,067.

The Shanghai Composite settled 20 points or 0.69% lower at 2,883.61, while the Hang Seng fell 428 points or 1.5% to 28,122.02.

South Korea’s Kospi rose 2.8 points to 2018.

Closer to home, the Jakarta Composite Index and Singapore’s Straits Times Index both fell by 1.05% and 0.32% to 6,071.20 points and 3,223.80 points respectively.

Beijing moves to raise tariffs on US goods by June after Washington imposed an extra 25% tariff on thousands of Chinese products worth about US$200 billion.

US President Donald Trump has warned he was looking at more than US$300 billion worth of Chinese imports to be slapped with tariffs if trade negotiations don’t bear any fruit.

Global markets had rallied on the back of optimism an agreement between the two economic titans was close.

The retreat came after the Nasdaq on Wall Street suffered its worst day of 2019 and the Dow ended at its lowest point in more than three months.

Oanda Corp senior market analyst Jeffrey Halley warned there could be worse to come.

“Given that equity markets are so far behind the curve in repricing the risk to the new-world reality, equities could be in for an extended period of pain. Those with high beta to China such as Taiwan, Hong Kong, Indonesia and Australia may find it reaches migraine levels,” he said in a daily note yesterday.

No date has been decided for the next round of US-Sino trade negotiations, but Trump intends to meet his Chinese counterpart Xi Jinping at next month’s Group of 20 summit.

AFP reported Wells Fargo Investment Institute global market strategy Paul Christopher saying an eventual agreement seems the most likely outcome, although a political miscalculation is a rising risk.

“However, differences on key issues and in negotiating styles may spark more market volatility ahead,” he said.

While the local equity market held its ground to the sell-off across regional markets, the ringgit weakened to RM4.167 against the greenback, a year-to-date low for the local unit.