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.
Wall Street traders, optimistic that the Federal Reserve (Fed) will achieve a soft landing for the US economy, fueled a rally in riskier assets, driving the S&P 500 to a new all-time high. The index climbed 1.7%, marking its 39th record in 2024 and pushing this year's gains to approximately 20%. Tech stocks led the charge, while more defensive sectors lagged. The Nasdaq 100 rose 2.6%, and small caps in the Russell 2000 gained 2.1%.
The rally occurred as traders braced for the quarterly "triple witching" event, which involves the expiration of derivatives contracts tied to stocks, index options, and futures. This could lead to increased market volatility, with US$5.1 trillion set to expire on Friday, coinciding with benchmark index rebalancing.
The Fed's decision to cut interest rates by 50 basis points re-ignited hopes that it can stave off a recession. Data released Thursday showing a decline in jobless claims to their lowest level since May bolstered confidence in the labor market, despite slower hiring.
“Despite some volatility after the Fed’s rate cut, the S&P 500’s bullish trend remains intact,” said Fawad Razaqzada of City Index and Forex.com. The bold move by the Fed was seen as a crucial step to alleviate economic concerns without triggering panic reminiscent of the 2008 financial crisis.
The S&P 500 closed above 5,700, and the Dow Jones Industrial Average surpassed 42,000. Wall Street's favored volatility gauge, the VIX, dropped to around 16, reflecting the relative calm in the markets. Treasuries were mixed, with shorter-term bonds performing better, while the US dollar weakened.
Globally, the pound rose as the Bank of England held rates steady, while the yen fell ahead of the Bank of Japan’s policy decision. Bitcoin surged 5%.
According to Keith Lerner of Truist Advisory Services Inc., historical data shows that equities typically perform well following Fed rate cuts, especially if a recession is avoided. Stocks have risen in four of the six rate-cutting cycles since 1989, with large-cap stocks outperforming small caps in most instances. However, small caps may benefit more in the short term due to their exposure to floating rate debt, although their earnings trends lag behind.
Solita Marcelli of UBS Global Wealth Management expects the S&P 500 to reach 5,900 by year-end and advance to 6,200 by June 2025, with growth stocks, particularly in technology, continuing to drive returns. She noted that AI would be a significant factor in equity market growth in the coming years, recommending strategic exposure to this theme.
Meanwhile, a recent MLIV Pulse survey showed that 57% of respondents expect a rotation into value stocks to accelerate as the Fed's rate-cutting cycle continues. Despite favoring value, 75% of participants believe the US will manage a soft landing, with value stocks particularly popular among those predicting a recession.
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