AMID lingering uncertainties, the FBM KLCI swung back and forth between the positive and negative territory in a mini-roller coaster ride fashion before closing near the day’s intra-day low of 1,460.60 points.
At 5pm, the benchmark index gave up 5.01 points or 0.34% to end at 1,461.45 with gainers outpacing loser by 585 to 357, an indication that there was broad-based support of mid-cap stocks and low liners.
Total volume rose to 6.45 billion units worth RM3.30 bil from yesterday’s 5.94 billion shares worth RM3.29 bil.
The market tone turned positive shortly after Bank Negara Malaysia lifted one pressure point by retaining the existing overnight policy rate (OPR) at 1.75% even as it cautioned that “the introduction of targeted measures to contain COVID-19 in several states could affect the momentum of the recovery in the fourth quarter”.
Cumulatively, the central bank has reduced the OPR by 125 basis points (bp) this year, marking the most aggressive monetary easing cycle since the 2008-2009 Global Financial Crisis when the central bank reduced the benchmark interest rate by 150bp.
With the latest development, CGS-CIMB Research expects the OPR to remain unchanged at 1.75% until end-2021.
“The burden of providing the next leg of economic stimulus lies with fiscal policy, with market attention turning to the tabling of Budget 2021 on Nov 6 which is likely to remain expansionary,” commented its economist Michelle Chia who had earlier expected a 25bp rate cut.
As pointed out by Inter-Pacific Research in its Nov 3 trading note, the largely sideway trend is expected to persist over the near term as there remains cautiousness over the upcoming Budget 2021 announcement that is widely seen as a referendum on the Prime Minister’s political position.
“However, there should still be intermittent support on the heavyweights by local institutions as they look to arrest their recent pullback and such attempts could allow the FBM KLCI to stay above 1,450 points which is now the key index’s psychological support level,” projected the research house.
In the interim, the research house sees support at the 1,475-1,480 levels, followed by 1,490 points.
Aside from the OPR and Budget 2021, the outcome of the US presidency election can also impact the direction of the local bourse at least in the near term. – Nov 3, 2020
