FBM KLCI perks up in late-morning trade as regional sentiment improves
KUALA LUMPUR: A late-morning rally in Bursa Malaysia's blue chips leading up to the lunch break took the FBM KLCI into positive territory on Friday.
The benchmark index, which had been range-bound for much of the early session, jumped 3.35 points to 1,504.79 in a surge of buying interest marked by gains in financial heavyweights.
Broader market sentiment, however, remained subdued as the number of declining issues outweighed advancing by a ratio 1.87-to-1.
There was also subdued trading on the market with 1.15 billion shares changing hands for a low value of RM663.67mil as investors awaited the outcome of trade negotiations of Malaysian policymakers in Washington.
In banking counters, CIMB rose 11 sen to RM6.69 and Maybank gained seven sen to RM9.67. Hong Leong Bank climbed 16 sen to RM19.56, followwed by eight sen for RHB to RM6.32 and three sen for Public Bank to RM4.22.
Nestle reversed its earlier losses to put on RM16 sen to RM71.72 while Kuala Lumpur Kepong gained 24 sen to RM19.96.
Of actives, PUC rose 0.5 sen to 2.5 sen, Astro dropped 1.5 sen to 16 sen and Pavilion REIT shed two sen to RM1.52.
In regional markets, there was some rebound in equities prices after US President Donald Trump said he would wait two weeks before deciding on a potential attack on Iran.
Hong Kong's Hang Seng snapped three days of losses to rise 1.15% to 23,504. China's blue-chip CSI300 added 0.24% to 3,852 while the country's composite index was little changed at 3,364.
Japan's Nikkei slid 0.12% to 38,443.
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TOKYO: Japan's core inflation hit a more than two-year high in May, exceeding the central bank's 2% target for well over three years, keeping it under pressure to resume interest rate hikes despite economic pressure from U.S. tariffs. The data underscores the challenge the Bank of Japan faces in juggling pressure from persistent food inflation against risks to the fragile economy from uncertainty over President Donald Trump's trade policy. A slight majority of economists in a Reuters poll expected the BOJ's next 25-basis-point increase to come in early 2026. The core consumer price index (CPI), which excludes volatile fresh food costs, rose 3.7% in May from a year earlier, data showed on Friday, exceeding market forecasts for a 3.6% gain and accelerating from a 3.5% increase in April. It was the fastest annual pace since the 4.2% hit in January 2023. A separate index that strips away the effects of both volatile fresh food and fuel costs, which is closely watched by the BOJ as a better indicator of demand-driven price moves, rose 3.3% in May from a year earlier after a 3.0% rise in April. It was the fastest since January 2024, when it increased 3.5%. The increase was driven by stubbornly high prices of food, excluding volatile fresh items like vegetables, with Japan's staple rice seeing prices double in May from year-before levels. Rice balls cost nearly 20% more than year-before levels, while the price of a bar of chocolate rose 27%, the data showed. While slower than the 5.3% increase in goods prices, service-sector inflation accelerated to 1.4% in May from 1.3% in April in a sign firms were steadily passing on labour costs. 'Given heightened uncertainty over U.S. tariff policy, the BOJ is taking a wait-and-see approach to scrutinise developments in bilateral trade talks,' said Ryosuke Katagi, market economist at Mizuho Securities. 'But today's data shows anew that domestic inflation is heightening particularly that for goods. When looking just at price moves, conditions for additional rate hikes will likely stay in place throughout 2025,' he said. STICKY FOOD INFLATION Food prices, excluding those of volatile fresh food, rose 7.7% in May from a year earlier, faster than the 7.0% gain in April, reflecting the pain households are feeling from rising living costs. BOJ policymakers expect such cost-push pressures to moderate due to the yen's rebound, which pushes down import costs, and the base effect of last year's sharp rise in food prices. They have also stressed the need to go slow in raising rates because underlying inflation, which strips away such one-off factors and is driven by the strength of the economy, remains short of the BOJ's 2% target. BOJ Governor Kazuo Ueda said underlying inflation will stagnate for some time due to a slowdown in economic growth, but re-accelerate thereafter toward the bank's 2% target. 'If our economic and price forecasts materialise, we expect to keep raising interest rates,' Ueda told a speech on Friday. 'But there's extremely high uncertainty over each country's trade policy and its impact. As such, it's important to determine without pre-conception' whether the economy is moving in line with the BOJ's forecasts, he said. While the BOJ keeps its focus on risks to growth from Trump's tariffs, some analysts fret that food prices may keep rising longer than expected and lead to widespread inflation. 'Inflation is overshooting expectations. The rise in food costs is particularly big and re-accelerating this year,' said Yoshiki Shinke, an economist at Dai-ichi Life Research Institute, adding that firms seem keen to raise prices further. 'Core consumer inflation will likely slow below 3% in August and below 2% early 2026. But the pace of slowdown could be more moderate than we expect,' he said. After Tuesday's widely expected decision to keep interest rates steady, Ueda told reporters the BOJ was not behind the curve in addressing the risk of too-high inflation. But minutes of the BOJ's April 30-May 1 meeting showed the board divided on the future inflation path with some members warning that inflation could overshoot the BOJ's projections. Underscoring its attention to inflationary pressures, a BOJ research paper said this week that hiking rates only gradually as raw material costs rise could heighten the risk of an upward spiral in wages and consumer prices. The BOJ ended a massive stimulus programme last year and in January raised short-term rates to 0.5% on the view Japan was on the cusp of durably meeting its 2% inflation target. While the central bank has signalled readiness to raise rates further, the repercussions from higher U.S. tariffs forced it to cut its growth forecasts and complicated decisions around the timing of the next rate increase.
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Malaysia's central bank, Bank Negara Malaysia (BNM), recently reported an increase in its international reserves, reaching USD119.6 billion as of May 30, 2025, up from USD119.1 billion just two weeks earlier. This modest growth in foreign reserves signals positive developments in Malaysia's economy, reflecting its resilience in navigating global economic challenges. It highlights the country's ability to manage external pressures and provides a buffer against potential financial shocks. However, the key question remains: what does this mean for the everyday citizens? How can we interpret this trend as a sign of a strengthening economy, and how does it translate into tangible benefits for the people? Why Our Money Pile is Growing? One main reason our reserves are increasing is that Malaysia is selling more goods to other countries than it buys. For example, in April 2025, Malaysia sold RM10.5 billion more in goods than it bought, especially in electronics and gas. When we export a lot, more foreign money comes into the country. This extra foreign currency is then kept by BNM as part of its reserves. This shows Malaysia's strength in making and selling important products worldwide. Another big factor is that foreign investors are putting their money into Malaysian government bonds. These bonds offer better returns compared to those in countries like the U.S. or Japan, where interest rates might not be as good anymore. In May 2025 alone, foreign investors brought in RM2.6 billion. When these investors bring in foreign money and convert it to Ringgit to buy our bonds, it directly adds to BNM's foreign currency reserves. This trend highlights that investors trust Malaysia's economy. What This Extra Money Means for Malaysia? Having USD119.6 billion in reserves is a big deal. It means Malaysia has enough foreign money to pay for about 5 months of imported goods and services. This is well above the recommended 3 months by the IMF, a global financial body. This cushion helps Malaysia if import prices go up or if global trade faces problems. Also, these reserves are almost equal to our short-term foreign debts (0.9 times), showing that we don't rely too much on quick foreign loans to run our economy. This strong position makes us less vulnerable to sudden money outflows. Our reserves are also made up of different types of assets, which gives BNM more flexibility. Most of it, USD106.4 billion, is in foreign currencies. We also have USD5.8 billion in Special Drawing Rights (a type of international money from the IMF) and USD3.8 billion in gold. Having this mix of assets helps BNM act fast if there's a global money crisis or if a lot of foreign money suddenly leaves the country. It means BNM has many options to handle financial pressures. Impact on the Ringgit and Economic Policy This steady increase in our foreign reserves suggests that the Malaysian Ringgit might become more stable after being a bit weak. When investors worldwide see Malaysia has strong reserves and can attract foreign money, it makes them see Malaysia as a safe and attractive place among growing economies. This improved perception could boost confidence in the Ringgit, making its value more steady and potentially stronger against other major currencies. If our reserves keep growing, it means BNM will have more room to make decisions about our economy. For instance, BNM might be able to slightly lower interest rates if needed, without worrying too much about the Ringgit losing value or losing trust from investors. This flexibility is very important in today's uncertain global economy, allowing BNM to support Malaysia's economic growth without risking financial stability. Our 'Economic Shield' in a Shaky World Essentially, this rise in Malaysia's international reserves is more than just a number. It's a vital 'economic shield' that gives Malaysia significant power and freedom in managing its money and economy. In a world full of unclear interest rates, political tensions, and unpredictable supply chains, having a big financial buffer is extremely important. This 'shield' helps Malaysia handle unexpected global problems, like a sudden economic slowdown or a quick exit of foreign money, by lessening their impact. It also keeps investors confident, as they know BNM has the resources to protect the Ringgit and keep the financial system stable. Plus, strong reserves allow BNM to support economic growth when necessary, without being held back by a weak financial position. Overall, these strong reserves show Malaysia's smart economic planning and its ability to deal with global financial challenges. Conclusion As a conclusion, the growth in Malaysia's international reserves to USD119.6 billion is unequivocally a positive signal, extending beyond mere financial figures. For the average Malaysian, this translates into tangible benefits, a more stable Ringgit means greater purchasing power for imports and overseas travel, while reduced inflation helps stretch household budgets. Furthermore, these robust reserves act as a crucial national safety net, safeguarding jobs and businesses during global uncertainties and bolstering confidence in our financial system. Ultimately, this increased 'economic shield' empowers BNM to maintain stability and foster sustainable growth, directly enhancing the economic well-being and security of all Malaysians in a volatile global landscape. By Dr. Shahrul Azman Abd Razak Researcher and Islamic Finance Consultant Kuala Nerang, Kedah Related
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