KLCI ends marginally higher ahead of budget

Published: Friday October 18, 2013 MYT 12:00:00 AM 

Updated: Friday October 18, 2013 MYT 9:17:35 AM

BY DANIEL KHOO

The US Capitol is seen in Washington, DC. The US economic
woes have tested the nerves of world markets in the past three months. — AFP

PETALING JAYA: Longer-term concerns rather than any deal over the US debt ceiling curbed buyer appetite for riskier assets, with the local bourse’s benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) closing only marginally higher.

Asian markets also came off their highs despite optimism over the US debt ceiling deal. The FBM KLCI mirrored regional markets when the index opened higher and above the key 1,800-point resistance level but could not hold on to the gains, managing to rise a third of a percent.

Analysts point to the upcoming Budget 2014 and the sustainability of the US deal as reasons why the local bourse and regional markets reacted the way they did.

Furthermore, the local market has to deal with other dampeners, as industry sources have noted that consumers were holding back their spending amidst possible cuts in subsidies as well as the announcement of a clear timeline for the implementation of the goods and services tax (GST).

“It would seem that consumer spending may be affected, moving forward. The market is expecting the GST to be implemented in the near term and this could affect spending power, as people adjust to this new reality,” Interpacific Research head of research Pong Teng Siew told StarBiz.

“There are also some concerns amid expectations that the Government would implement stricter curbs on the property sector with the real property gains tax that is anticipated to curb property speculation. This would remove one layer of demand from the property market,” he said.

“It is not a terrific bounce really, but is still a welcome relief after a period of uncertainty,” Pong quipped.

Etiqa Insurance and Takaful research head Chris Eng said the market’s performance had been anticipated and advised a “sell into strength” strategy for the time being.

“We did sell into strength once it had reached 1,800 points. However, there are some stocks that we like, including Tenaga Nasional Bhd, as we are expecting a good set of quarterly results during the reporting season,” said Eng.

Meanwhile, the global outlook remains uncertain, as the raising of the debt ceiling is seen to be a temporary solution before an ultimate resolution can be found.

“The latest agreement (only) defers an ultimate resolution on the issue. It removes the problem for a while and people are expecting that they would eventually run into this problem again in a few months. I am a little cautious on celebrating this victory for the US,” Pong said.

The global superpower’s economic woes have tested the nerves of world markets in the past three months.

On a year-to-date basis, the FBM KLCI remains in positive territory with a modest gain of 6.42%, while for the one-year period, returns were in the green with an 8.23% return.

Moving forward, Pong said the market may likely continue its resilience despite some foreign selling and that it was not impossible for it to cross 1,810 on a closing basis as an immediate target.

“It still appears that some foreign funds are selling and this seems to be continuing despite the resolution of the US debt issue. The withdrawal seems to be associated with concerns of the impact of the upcoming Budget 2014,” he noted.