KUALA LUMPUR, July 29 (Bernama) -- Bursa Malaysia rebounded to close higher on Wednesday on selective buying of defensive stocks after a volatile trading session. IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said consumer products and services stocks lifted the key index higher, overcoming lingering geopolitical concerns. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 3.08 points to 1,715.56 from yesterday’s close of 1,712.48. The benchmark index, which opened 1.91 points higher at 1,714.39, moved between 1,710.79 and 1,720.59 during the day’s trading. In the broader market, gainers outstripped decliners 550 to 476, while 612 counters were unchanged, 1,129 untraded, and 48 suspended. Turnover rose to 2.96 billion units valued at RM2.48 billion from 2.94 billion units valued at RM2.56 billion on Tuesday.
Manufacturing activity in the euro zone remained deep in contraction territory in August, with the Purchasing Managers' Index (PMI) registering 45.8, slightly above the preliminary estimate of 45.6 but well below the 50 mark that separates growth from contraction. The latest data indicates that the sector is experiencing significant challenges, with demand dropping at its steepest pace this year, suggesting that a recovery remains distant.
Key Takeaways:
Manufacturing Contraction Continues: The euro zone's manufacturing sector remains in a prolonged downturn, with the PMI staying below the growth threshold for several months. Output also saw little improvement, nudging up to 45.8 from 45.6 in July. The sector has been in recession for 26 consecutive months, reflecting deteriorating business conditions.
Sharp Decline in Demand: New orders dropped to 43.3 in August, down from 44.1 in July, reaching their lowest level since December. Both domestic and international demand slowed, with foreign demand experiencing its fastest decline this year. This weakening demand undermines short-term hopes for a rebound in manufacturing activity.
Pricing Pressures and Implications for ECB: For the first time in 16 months, manufacturers in several countries, including France, the Netherlands, Greece, and Italy, raised prices, complicating the European Central Bank's (ECB) efforts to manage inflation. Although overall inflation in the euro zone fell to a three-year low of 2.2% in August, the increase in manufacturing prices could challenge the ECB's strategy of relying on falling goods prices to control inflation. The ECB is still expected to cut its deposit rate twice more this year, in September and December, but this might be fewer reductions than previously anticipated by the markets.
Overall, the euro zone's manufacturing sector continues to face headwinds, with weak demand and rising prices presenting challenges for both businesses and policymakers. The economic outlook remains clouded, with limited signs of a near-term recovery.
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