Thursday 28 Mar 2024
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STOCKS on the local stock market shot sharply higher last Wednesday, the first trading day after an extended weekend break.

Sentiment was buoyed by a strong rebound in oil prices, driven by falling rig count in the US and spending cuts announced by oil majors. The global benchmark, Brent crude jumped as high as US$59 per barrel, having fallen as low as US$45 per barrel in mid-January. The ringgit also strengthened, to as high as 3.55 to the greenback.

Our currency has been moving in lockstep with oil prices, of late. This is unsurprising given our dependency on oil revenue. Oil price is seen to be one of the biggest factors in determining the country’s economic health this year.

Nevertheless, even as the rally was unfolding, many were sceptical on whether it is sustainable. There remains a supply glut that will last for months, perhaps even years, while capex cuts will only affect supply in the longer-term.

Sure enough, the latest report saw US stockpiles rising to the highest level on record and oil prices have since given back part of its gains. The Brent crude is trading around US$58.31 per barrel by the end of the week.

Sentiment also turned cautious towards the end of the week after the European Central Bank took a hard line on Greek debt. The country’s new anti-austerity government is trying to negotiate softer terms on its bailout programme.

We are likely to see more volatility ahead, in the oil and financial markets.

Whilst I expect sentiment on the local bourse to stay relatively upbeat in the near term, investors should keep any eye on external developments.

The total value of my portfolio was down 1.35% for the week. Nevertheless, the portfolio is up 3.3% since inception, outperforming FBM KLCI, which has fallen by 0.9% over the same period.

I did not make any changes to my portfolio last week.

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This article first appeared in The Edge Malaysia Weekly, on February 9 - 15, 2015.

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