MARKET DEVELOPMENT
Ringgit at 17-year Low, But Props up Palm Oil Price
Ringgit at 17-year Low, But Props up Palm Oil Price
30/09/2015 (The Star) - The weaker ringgit, which has dropped to a fresh 17-year low against the US dollar, is helping to prop up the price of crude palm oil (CPO), which has risen to its highest level in more than a year.
The Benchmark CPO futures on Bursa Derivatives rose RM57 or 2.4% to RM2,451 a tonne.
Shares in plantation companies climbed on expectations that rising CPO prices will boost planters’ profits.
However, the broader market sentiment remained fragile as the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) fell for a second day in a row on global growth concerns.
“Markets are on an edge and jittery,” said Inter-Pacific Securities head of research Pong Teng Siew.
“The week-to-week performance of the FBM KLCI outlook can be very different.
“We are looking for more downside but sentiment could get worse,” he added.
The market saw volatile trade, slumping below the key 1,600-point level before closing the day 5.11 points or 0.32% down to 1,603.32 points yesterday.
Local banks were the main decliners on Bursa Malaysia, with Hong Leong Bank down 16 sen to RM13.06, RHB Capital losing 14 sen to RM5.88, CIMB down 10 sen to RM4.53, Public Bank down six sen to RM17.42, AmBank losing three sen to RM4.55 and Maybank shedding one sen to RM8.39.
Elsewhere, in Japan, the Nikkei 225 fell 714.27 points to 16,930.84, while Hong Kong’s Hang Seng Index fell 3% to 20,556.60, its lowest close since July 2013.
Increasing worries about a sharp slowdown in the global economy also led to the Shanghai Composite Index losing 62.62 points or 2.02% to 3,038.14.
In the currency market, the ringgit touched a low of 4.48 to the dollar before strengthening slightly to 4.45 at the end of the day. The Indonesian rupiah slipped to 14,730 at one point, its lowest level since July 1998, according to Thomson Reuters data.
Chief market analyst at ForexTime or FXTM Jameel Ahmad said there was an increased possibility that the ringgit would hit a “further milestone low” later this week if China’s manufacturing data is weaker than expected.
“This would have the potential to pull market sentiment lower as a whole, but it is the emerging markets which will be at the highest risk, mainly because they are so reliant on China trade at a time where they are already combating depressed commodity prices,” he said in a report.
He added that while many of the factors pushing the ringgit further down were external, internal risks would begin to emerge due to a jump in inflation and slower domestic data, as consumers had lower purchasing power than they had a year ago.
Another factor weighing on the Malaysian bond market is the RM11bil worth of Malaysian Government Securities due to mature, which could see some foreigners deciding not to reinvest in new bonds.
“The bond markets are on edge because there is a possibility that they may not decide to reinvest in new bonds, so investors are bracing for that possibility,” said Pong.
Meanwhile, experts have warned of the financial impact on the mining and metals sector if Glencore Plc, one of the world’s largest resource companies, does not get its high debt levels in order.
The Benchmark CPO futures on Bursa Derivatives rose RM57 or 2.4% to RM2,451 a tonne.
Shares in plantation companies climbed on expectations that rising CPO prices will boost planters’ profits.
However, the broader market sentiment remained fragile as the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) fell for a second day in a row on global growth concerns.
“Markets are on an edge and jittery,” said Inter-Pacific Securities head of research Pong Teng Siew.
“The week-to-week performance of the FBM KLCI outlook can be very different.
“We are looking for more downside but sentiment could get worse,” he added.
The market saw volatile trade, slumping below the key 1,600-point level before closing the day 5.11 points or 0.32% down to 1,603.32 points yesterday.
Local banks were the main decliners on Bursa Malaysia, with Hong Leong Bank down 16 sen to RM13.06, RHB Capital losing 14 sen to RM5.88, CIMB down 10 sen to RM4.53, Public Bank down six sen to RM17.42, AmBank losing three sen to RM4.55 and Maybank shedding one sen to RM8.39.
Elsewhere, in Japan, the Nikkei 225 fell 714.27 points to 16,930.84, while Hong Kong’s Hang Seng Index fell 3% to 20,556.60, its lowest close since July 2013.
Increasing worries about a sharp slowdown in the global economy also led to the Shanghai Composite Index losing 62.62 points or 2.02% to 3,038.14.
In the currency market, the ringgit touched a low of 4.48 to the dollar before strengthening slightly to 4.45 at the end of the day. The Indonesian rupiah slipped to 14,730 at one point, its lowest level since July 1998, according to Thomson Reuters data.
Chief market analyst at ForexTime or FXTM Jameel Ahmad said there was an increased possibility that the ringgit would hit a “further milestone low” later this week if China’s manufacturing data is weaker than expected.
“This would have the potential to pull market sentiment lower as a whole, but it is the emerging markets which will be at the highest risk, mainly because they are so reliant on China trade at a time where they are already combating depressed commodity prices,” he said in a report.
He added that while many of the factors pushing the ringgit further down were external, internal risks would begin to emerge due to a jump in inflation and slower domestic data, as consumers had lower purchasing power than they had a year ago.
Another factor weighing on the Malaysian bond market is the RM11bil worth of Malaysian Government Securities due to mature, which could see some foreigners deciding not to reinvest in new bonds.
“The bond markets are on edge because there is a possibility that they may not decide to reinvest in new bonds, so investors are bracing for that possibility,” said Pong.
Meanwhile, experts have warned of the financial impact on the mining and metals sector if Glencore Plc, one of the world’s largest resource companies, does not get its high debt levels in order.