Bursa rebounds slightly but ringgit softens further

PETALING JAYA: The local stock market rebounded by 0.1% today after it tanked on Monday on fears over renewed trade tensions, but the ringgit continued its downward trend, weakening as much as 0.37% to 4.1930 to the US dollar.

As at 5pm, the local unit was trading 0.3% lower at RM4.1900 against the greenback, compared with RM4.1775 on Monday. The ringgit has weakend 1.8% in the past two weeks from 4.1143 recorded on July 25.

Today, Bursa Malaysia’s benchmark index, the FBM KLCI, closed 0.09% or 1.38 points higher at 1,611.79 points after trading in the range of 1,588.98 to 1,617.22 points during the session. Market breadth, however, was negative with 502 losers compared with 436 gainers.

Plantation and telecommunication stocks registered the biggest losses, with their indices declining 0.45% and 0.65%, respectively.

Meanwhile, other equity markets in the region continued to see heavy selling, with the Shanghai bourse’s composite index retreating 1.6%, Hong Kong’s Hang Seng Index easing 0.67%, Tokyo’s Nikkei 225 losing 0.65% and Seoul’s Kospi falling 1.5% respectively.

Malacca Securities said market conditions remain frail after Monday’s steep drop with global equities continuing to be gripped by the escalating trade war between the world’s two biggest economies.

“Under the prevailing environment, we see stocks on Bursa Malaysia continuing to head lower over the near term as the market uncertainties are amplified.”

It said concerns over the slowing global economy remain unabated after the trade war moved into a more severe phase that shows little hope for a quick reprieve.

“Fears of a prolonged trade tiff will also continue to keep market sentiments on the cautious side and send more market players to the sidelines until there is renewed clarity in the market’s direction.”

Moody’s Investors Service vice-president of sovereign risk group Martin Petch said the US Treasury’s designation of China as a currency manipulator represents an escalation of the trade tensions between the two countries, and will likely contribute to a hardening of positions. It also increases the likelihood that US tariffs on Chinese products will rise beyond current levels, followed by further retaliatory measures by China.

He said unless negotiations between the US and China resume rapidly, this latest development is likely to create negative spillover effects in both China, the US and globally, and particularly in Asia.

“At this stage, we do not expect the US Treasury designation to have a material impact on China’s foreign exchange policy. However, market expectations of potential further yuan devaluation may lead to devaluation in other currencies, particularly those with strong trading ties to China,” said Petch.

Meanwhile, IHS Markit Asia Pacific chief economist Rajiv Biswas said the yuan’s slide against the US dollar will reinforce negative sentiment in global financial markets towards emerging markets currencies.

“Risk aversion towards emerging markets currencies is also increasing due to the escalating US-China trade war and the recent wave of policy easing by Asia Pacific central banks, including Bank Negara Malaysia.

source https://www.thesundaily.my/business/bursa-rebounds-slightly-but-ringgit-softens-further-CD1225206