KUALA LUMPUR – The ringgit is expected to trend higher versus the US dollar next week as there is little data to suggest that United States yields could rise much, while China’s Covid-19 policy shift is a major driver for the ringgit.
SPI Asset Management managing director Stephen Innes said the local note would trade around the 4.60 range against the US dollar next week.
“A further push towards the US dollar unwinding may be the dominant narrative for now, but be mindful of choppiness moving into year-end,” he said.
Innes emphasised that foreign issues, particularly development in China, have a larger effect on the ringgit than the announcement of the country’s gross domestic product.
“However, the (announcement) will (have an impact on the ringgit) because the bank can shift its priority to growth policies rather than inflation-fighting policies,” he added.
Earlier today, BNM announced that Malaysia’s economy grew by 14.2% in the third quarter this year supported by continued expansion in domestic demand, firm recovery in the labour market, robust electrical and electronics (E&E), as well as non-E&E exports and ongoing policy support.
Meanwhile, another analyst believes that the US Federal Reserve would take a more moderate approach to interest rates as a result of the lower-than-expected US inflation figures.
According to data issued on Thursday, the consumer price index rose 7.7% year-on-year but fell from 8.2% last month.
On a weekly basis, the ringgit jumped 2.65% yesterday against the US dollar to 4.6200/6250 compared with 4.7460/7495 a week earlier.
Against a basket of major currencies, the local note traded easier on a Friday-to-Friday basis.
It depreciated against the Singapore dollar to 3.3527/3568 from 3.3517/3546 at the end of last week and dropped vis-a-vis the Japanese yen to 3.3047/3088 from 3.2111/2137 a week earlier.
The ringgit eased against the British pound to 5.4322/4381 from 5.3231/3270 and weakened against the euro to 4.7471/7522 from 4.6383/6417.
Bursa Malaysia is likely to move higher next week, supported by returning global investors, with the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) moving between 1,460 and 1,480, said a dealer.
Rakuten Trade Sdn Bhd vice-president of equity research Thong Pak Leng said the strong support from foreign institutions is expected to lift the local bourse with buying momentum to continue next week.
“We expect the FBM KLCI to see immediate resistance at 1,490, with support at 1,420,” he said.
Meanwhile, Innes said Bursa stocks surged in a rising tide lifts-all-boats scenario this week as slower-than-projected US inflation galvanised bets the Fed could downshift its aggressive rate-hike path.
According to news reports, US inflation eased to 7.7% in October 2022 compared with a reading of 8.2% in September 2022, raising hopes that price hikes have begun to slow down.
Furthermore, Innes said Malaysia’s newly-released positive economic data for Q3 2022 also contributed towards the gain this week.
For next week, he said news on China scrapping Covid-19 flight suspensions and reductions on quarantine periods for inbound travellers would be the focus among investors.
“Since investors are growing more sensitive to the reopening news than the lockdowns, there is finally some room for fine-tuning Covid-19 controls. This shift in policy is great news for the local market,” he said.
He also said the stronger ringgit would be another important driver for local stocks.
“The US dollar’s rise over the past year has left Malaysian markets increasingly exposed to capital outflow, so with the fall in US inflation, that external vulnerability has been eased and should open the door to inbound investment given the softer greenback,” he said.
Yesterday, the FBM KLCI strengthened 1.27%, or 18.47 points, to 1,468.21 from Thursday’s close of 1,449.74.
Compared to a week earlier, the key index rose 29.93 points from 1438.28 previously.
On the index board, the FBM Emas Index gained 199.41 points to 10,416.90, the FBM 70 earned 229.89 points to 12,372.02, and the FBMT 100 Index was 202.67 points higher to 10,151.59.
The FBM Emas Shariah Index was firmer by 202.49 points to 10,529.58 and the FBM ACE added 174.13 points to 5,093.31.
Sector-wise, the financial services index was 260.54 points up to 16,353.23, the industrial products and services index widened 5.62 points to 179.40, and the plantation index edged up 81.71 points to 6,902.73. However, the energy index lost 0.96 of-a-point to 724.32.
During the trading week, weekly turnover increased to 15.83 billion units worth RM8.83 billion from 13.37 billion units worth RM8.89 billion in the previous week.
The Main Market volume was higher at 10.75 billion shares valued at RM7.62 billion against last week's 9.03 billion shares valued at RM7.61 billion.
Warrant volume climbed to 1.67 billion units worth RM358.37 million from 1.62 billion units worth RM325.14 million previously.
The ACE Market volume rose to 3.38 billion shares valued at RM840.71 million from 2.70 billion shares valued at RM955.85 million. – Bernama, November 12, 2022
