KUALA LUMPUR (Jan 20): External risks such as incoming US President Donald Trump's policies, Brexit and China's relationship with the US will continue to be key factors in determining the movement of the ringgit, according to MIDF Research.

"We reckoned that uncertainties would continue to be on the cards, with external risks playing an important factor in determining the movement of the Malaysian ringgit, external demand of our exports and cost of our imported goods," it said in a strategy note today.

"Uncertainties over the impact of external geopolitical events in the US, UK and China will likely result in a highly volatile movement of prices across asset class," it added.

It added that further clarity on the uncertainties will only be seen in the second quarter of calendar year 2017.

"These concerns have affected the outlook of the companies listed on the stock exchange. And of late, our market [has] seen an unabated period of high volatility as compared to stabilising prices, in general, of the both the emerging and world benchmark indices," the firm said.

It also stated that the external uncertainties have created volatility in the domestic capital market, with pressure being seen on the ringgit, as well as oil and crude palm oil prices.

"Despite the price volatility, our market has only been moving sideways with a decline of 5.9 points (0.4%) since Nov 1, 2016.

"Meanwhile, our ASEAN peers saw mixed performance at a mode defined magnitude with Singapore's Straits Times Index (FSSTI) and Thailand's SET Index (SET) [seeing] gains of 6.6% and 3.7% respectively while Indonesia's Jakarta Composite Index (JCI) saw a decline of 2.2%," it said.

It also added that a flattish market expected in the near term may not be conducive for the buy and hold strategy and suggested that the velocity and volatility of stock price movements should be assessed.

"By assessing the velocity (liquidity) and volatility of stock price movements, there are pockets of opportunities in the local market, taking advantage of the movement of market sentiment and also the external and internal newsflow," it said.

"With corporate challenging earnings growth in the near term, companies might hold off providing generous dividends until the later quarters of the year," it added.

It opines that the market will move sideways in the near term, pending more clarity on external uncertainties.