KUALA LUMPUR, Sept 20 (Bernama) -- Bursa Malaysia ended higher on Friday in line with most Asian markets, mirroring gains from Wall Street, where investors welcomed the US Federal Reserve's substantial interest rate cut. The FTSE Bursa Malaysia KLCI (FBM KLCI) rose by 3.17 points, or 0.19 per cent, to 1,668.82 at the close from Thursday's close of 1,665.65. It opened 5.03 points higher at 1,670.68, trading between 1,668.48 and 1,674.04 throughout the session. In the broader market, gainers outpaced decliners 732 to 468, while 465 counters were unchanged, 850 untraded and 32 suspended. Turnover swelled to 4.19 billion units worth RM5.97 billion, from Thursday's 3.99 billion units worth RM4.08 billion. UOB Kay Hian Wealth Advisors head of investment research, Mohd Sedek Jantan, noted the FBM KLCI's gains were led by utilities, logistics, and banking stocks, reflecting improved market sentiment. Additiona
An anticipated US policy rate cut this week is expected to positively impact Malaysian stocks, particularly in the oil and gas (O&G), real estate investment trust (REIT), and large-cap banking sectors, according to Kenanga Investment Bank.
Historically, US rate cuts have been favorable for the FBM KLCI, yielding a median return of 8% over a 12-month period following the cut. The index has shown negative returns over a 12-month horizon on only three occasions out of the past ten rate cuts, the research house noted.
"As all eyes this week will be on the US at the cusp of a rate decision, sentiment on broader equities will hinge not only on the extent of the cut but more so on the US Federal Reserve's (Fed) outlook," Kenanga stated.
The Fed is expected to announce its first rate cut in more than four years on Wednesday, though there is debate over the size of the reduction as inflation has eased and the employment market has cooled.
The FBM KLCI has already gained over 14% this year, driven by substantial gains in banking stocks. Foreign institutional investors have been actively buying Malaysian stocks, spurred by strong economic data and recent upgrades by JPMorgan and Goldman Sachs.
Bank Negara Malaysia is expected to maintain its current rates, which could be beneficial for banking stocks. However, Kenanga noted that "foreign funds are less likely to be induced into buying smaller-cap banks."
A US rate cut could also shift focus to the capital-intensive O&G sector as operating conditions may ease and global demand is likely to recover after some delay, potentially boosting oil prices.
Meanwhile, REITs present an attractive alternative to bonds amid declining yields on Malaysian Government Securities. Kenanga suggests there is still room for yields to drop to "around 3.6%" by year-end, which could lead to a re-rating of the REIT sector due to yield spread differentials.
Kenanga recommended
Dayang Enterprise Holdings Bhd (KL), Wasco Bhd (KL), and Dialog Group Bhd (KL) for the O&G sector, Public Bank Bhd (KL) for the banking sector, and Sunway REIT (KL) and Pavilion REIT (KL) for the REIT sector.
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