BNM OPR cut, oil price rise spur Bursa share gains

BNM OPR cut, oil price rise spur Bursa share gains
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KUALA LUMPUR (May 5): The FBM KLCI closed up 12.96 points or 0.94% at 1,389.55 today as a confluence of factors, including higher crude oil and palm oil prices as well as Bank Negara Malaysia’s (BNM) 50 basis-point overnight policy rate (OPR) cut to 2.00%, spurred broad-based buying across Bursa Malaysia.

At 5pm, Bursa saw 5.76 billion shares worth RM2.7 billion traded. There were 774 gainers and 162 decliners across the exchange as markets responded to news on the global easing of Covid-19 pandemic-driven movement restrictions. 

Broad-based buying across Bursa saw the index for small market capitalisation stocks close up 3.17% while the energy gauge, which tracks shares of oil and gas-related companies, was the largest percentage gainer after the index rose 5.27% with crude oil prices, as news on the global easing of Covid-19 pandemic-driven movement restrictions led to expectation of higher demand for the commodity.

On the KLCI, analysts said the index’s historical performance had been mixed in  May. "Based on historical data, we observe that the KLCI’s performance tended to be mixed in May, with an average m-o-m negative return of 1.3% over the past 10 years, but posting an average monthly positive return of 1.2% over the past 40 years. However, following the strong gains in April to reflect the relaxation of the Movement Control Order (MCO) (in Malaysia), we expect the market to turn choppy in May due to potential external events and earnings risks,” CGS-CIMB Securities Sdn Bhd analysts Ivy Ng Lee Fang and Nagulan Ravi wrote in a note today. 

"Investors will also be waiting for the government’s decision on whether to extend the current conditional MCO, which ends on May 12. Markets will also be watching the Parliament sitting, which will reconvene for one day (instead of 15 days) due to Covid-19, for the first time following the change of government in February. Also keeping investors busy locally is the results season, which will be spread over two months (May-June) instead of the usual May. On the external front, investors will be tracking news flow on the Covid-19 epidemic and (US President) Donald Trump’s threat to reignite the US-China trade war over the coronavirus,” they said.

In Malaysia, BNM said in a statement today that at its Monetary Policy Committee meeting today, the committee decided to reduce the OPR by 50 basis points to 2.00%. BNM said the ceiling and floor rates of the OPR corridor are correspondingly reduced to 2.25% and 1.75% respectively.

In theory, interest rate cuts are good for stocks but bad for currencies. 

Globally, it was reported that Asian stocks rose on Tuesday, tracking a late Wall Street rally as governments eased coronavirus lockdowns while oil extended gains on expectations fuel demand would begin to pick up.

It was reported that amid light share trading volumes, with China, Japan and South Korea closed for public holiday, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.84%.

“(Crude) Oil prices jumped again on Tuesday on hopes for a recovery in vehicle traffic and fuel demand, as some US states and countries in Europe and Asia start to ease coronavirus lockdown measures. West Texas Intermediate (WTI) crude futures surged 9.9%, or US$2.01, toUS$22.40 per barrel as of 0705 GMT. The US benchmark has now risen for five sessions in a row. Brent crude futures were up 6.9%, or US$1.87, at US$29.07, rising for a sixth straight day.

"Malaysian palm oil futures on Tuesday rose off nine-month lows hit in the previous session as crude prices jumped, although gains were limited by forecasts for higher April inventory. The benchmark palm oil contract for July delivery on the Bursa Malaysia Derivatives Exchange gained RM10, or 0.5%, to RM1,993 (US$462.95) per tonne by the midday break, after being volatile in early trade,” Reuters reported.

Palm oil prices move in tandem with higher crude oil prices as costlier crude oil generates expectation of higher palm oil demand to produce biodiesel.

A glance across Bursa today showed that oil and gas-related shares ended among the most-active stocks and top gainers.

The most-active list included Velesto Energy Bhd and Hibiscus Petroleum Bhd while top gainers included Hengyuan Refining Co Bhd and KLCI stock Petronas Dagangan Bhd.

Petronas Dagangan’s share price closed up 56 sen or 2.81% at RM20.50.