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.
The Malaysian ringgit is on track to continue its impressive rally following what may be its best quarterly performance since 1973. The ringgit has gained over 12% against the US dollar this quarter, making it the best performing emerging-market currency. Analysts believe the currency will sustain its strength due to improving trade performance, narrowing interest rate differentials with the US, and attractive asset valuations.
Robust economic growth and potential inflationary pressures, should the government reduce fuel subsidies, may also prompt Bank Negara Malaysia to maintain its current monetary policy stance into 2025, even as other central banks reduce borrowing costs. Foreign investor inflows and continued conversion of foreign currency deposits will further support the ringgit's strength.
Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corp, commented that Malaysia’s current account surplus, combined with a neutral central bank and stable fundamentals, could lead to further gains, especially with expectations of US rate cuts reducing the yield differentials between the two nations.
Since April, the ringgit has surged due to a rebound in exports and efforts by the central bank to encourage state-linked firms to repatriate overseas investment income. Global funds have invested US$2.5 billion (RM10.51 billion) into Malaysian bonds in July and August, with an additional US$1.2 billion flowing into local equities since June.
The ringgit also stands to benefit from a rotation into Asia, as foreign investors shift focus from Latin American currencies, according to BNP Paribas strategist Chandresh Jain. Despite recent gains, some market indicators suggest a potential consolidation in the near term, especially with upcoming subsidy reform and fiscal deficit updates in the country’s budget announcement next month.
Wee Khoon Chong, a strategist at Bank of New York Mellon, noted that the ringgit’s long-term valuation remains attractive and cheap based on the effective exchange rate.
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