KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Japan's economy rebounded in the second quarter of 2024, driven by an increase in private consumption, signaling a potential shift towards the virtuous cycle of rising incomes and increased spending that the Bank of Japan (BOJ) has long sought. This rebound is a positive development for the central bank, which has been looking for evidence that wage gains could spur personal spending and lead to stable, demand-driven inflation.
Key Highlights:
GDP Growth: Japan's gross domestic product (GDP) expanded at an annualized rate of 3.1% in the second quarter, exceeding the consensus estimate of 2.3% and reversing a revised 2.3% contraction in the first quarter. This growth was largely fueled by a recovery in personal spending, which had been declining for the past year.
Wage Increases and Consumption: The recovery in consumption follows significant wage hikes by large companies—the biggest in more than three decades—and the implementation of a government tax rebate. These factors have contributed to a gradual recovery in consumer spending, which economists believe may be sustainable.
Impact on BOJ Policy: The positive economic data provides a supportive backdrop for the BOJ, which recently raised its benchmark interest rate for the second time this year and unveiled a plan to halve monthly bond purchases by the first quarter of 2026. BOJ Governor Kazuo Ueda has indicated that the central bank may continue to raise rates if economic data aligns with its forecasts.
Political Context: The economic rebound comes at a critical time as the ruling Liberal Democratic Party (LDP) prepares to select a new prime minister following Fumio Kishida's announcement that he will not run in the upcoming party leadership election. The new prime minister will have the option of calling a general election, which could influence the government's approach to managing the economy.
External and Internal Factors: The report also highlights that negative impacts from one-off events, such as production halts at automakers and an earthquake on New Year's Day, may have dissipated, allowing for stronger consumption. Additionally, businesses' capital spending exceeded expectations, with a 0.9% gain during the period, supporting the overall economic recovery.
Yen and Inflation Dynamics: The recent strengthening of the yen could help ease concerns about price hikes among consumers. Rising import costs have kept consumer inflation at or above the BOJ's 2% target for 27 months, but the yen's appreciation, driven by expectations of narrowing interest rate differentials between the US and Japan, may alleviate some inflationary pressures.
Tourism Boost: Japan continues to benefit from a surge in inbound tourism, with a record 17.8 million foreign visitors in the first half of the year. The tourism industry reported a significant increase in spending by tourists, further supporting the economy.
Outlook: The rebound in Japan's economy, driven by consumption and supported by wage growth, provides a favorable environment for the BOJ as it continues to adjust its monetary policy. However, external factors, such as the US Federal Reserve's actions and global economic conditions, will remain critical in shaping Japan's economic trajectory in the coming months.
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