KUALA LUMPUR, July 30 (Bernama) -- Bursa Malaysia's key index closed at an intraday high today, supported by continued buying interest even as renewed geopolitical tensions and a weaker overnight lead from Wall Street following the US Federal Reserve's (Fed) decision to stand pat on interest rates weighed on broader sentiment. The Fed has decided to hold rates steady for the fifth consecutive meeting, with the Federal Funds Rate unchanged between 3.50 per cent and 3.75 per cent. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 4.84 points to 1,720.40 from yesterday’s close of 1,715.56. The benchmark index, which opened 1.14 points lower at 1,714.42, hit its lowest level of 1,710.69 in early trade before gaining momentum for the rest of the day. However, the broader market was negative with losers outpacing gainers 581 to 411, while 612 counters were unchanged, 1,173 untraded, and 87 suspended. Turnover declined to 2.49 billion units valued at RM2.25 billion from ...
Anticipated US interest rate cuts are prompting investors to diversify beyond Big Tech stocks. Since early 2023, companies like Nvidia, Microsoft, and Amazon have driven substantial returns, but a recent cool inflation report has heightened expectations for a Federal Reserve rate cut, making other market sectors more attractive.
Market Shifts and Performance
Recent market movements suggest a shift may already be underway. The tech-heavy Nasdaq 100 saw its biggest drop of the year, while the small-cap Russell 2000 experienced its best day in 2024. The Nasdaq 100 is up 21% this year, whereas the Russell 2000 has only gained 6%.
Broader Market Potential
Lower rates are expected to benefit underperforming sectors such as small-caps, real estate, and industrials. Fed fund futures indicate a nearly 90% chance of a 25 basis point rate cut at the Fed's September meeting. Smaller companies and industrials, which rely on credit and debt, stand to gain the most from lower rates.
Equity Valuations and Bond Yields
Falling bond yields could make equities more attractive. The 10-year Treasury yield, recently around 4.2%, has dropped 50 basis points from April highs. The S&P 500's forward earnings multiple of 21.4, compared to its historical average of 15.7, suggests potential for growth if yields stabilize.
Skepticism and Megacap Resilience
Despite potential shifts, some investors remain cautious. Megacap tech stocks, central to the AI theme, are expected to remain resilient in uncertain economic conditions. These stocks' heavy weighting in indices means any sustained decline could impact the broader market.
Conclusion
With expected rate cuts, investors are looking beyond Big Tech to sectors that could benefit from lower rates. While the dominance of megacap tech continues, the broader market may see renewed interest in previously lagging sectors, provided economic conditions and bond yields align favorably.
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