KUALA LUMPUR (Feb 4): Malaysian shares may take the cue from overnight gains in US stocks as crude oil prices rose further.
Firmer crude oil prices may also support the ringgit as the commodity constitutes a crucial component of the Malaysian economy.
Last Friday (Jan 30), the FBM KLCI closed lower at 1,781.26 points. The local stock market was closed for holidays last Monday and yesterday.
Yesterday, the ringgit strengthened to 3.6115 against the US dollar. This compared to 3.6337 a day earlier.
Today, Reuters reported that U.S. stocks jumped more than 1 percent on Tuesday, led by energy shares as oil prices extended their recent rally, while higher-than-expected January car sales also bolstered the advance.
The Dow Jones Industrial Average rose 305.36 points, or 1.76 percent, to 17,666.4, the S&P 500 gained 29.18 points, or 1.44 percent, to 2,050.03 and the Nasdaq Composite added 51.05 points, or 1.09 percent, to 4,727.74.
U.S. crude oil prices rose 7 percent to settle at $53.05 . Brent and U.S. oil prices have risen roughly 19 percent since Wednesday's close. The S&P 500 energy index climbed 2.8 percent.
Despite the rise in crude oil prices, Malaysian liquified natural gas (LNG) exports will be closely watched in the near term.
Bank of America Merrill Lynch economist Chua Hak Bin said LNG prices could fall by some 50% by the middle of this year.
"Liquefied natural gas prices track oil prices, with a four to six-month lag.
"A 50% decline in LNG prices could shave the (Malaysian) current account surplus by about 2.5% to 3% of GDP, putting the risk of a current account deficit within striking distance," Chua wrote in a note.