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Bursa sentiment could turn cautious following Fed’s 25bps hike

Publish date: Thu, 23 Mar 2023, 11:59 AM

KUALA LUMPUR (March 23): Sentiment at Bursa Malaysia is likely to turn cautious post the US Federal Reserve’s decision to raise interest rate by 25 basis points (bps).

At 9.25am on Thursday (March 23), the FBM KLCI eased 3.73 points to 1,408.31 from Wednesday’s close of 1,412.04, after opening 5.07 points easier at 1406.97.

The US central bank’s decision to lift the benchmark interest rate by 0.25 percentage points to a target range of 4.75% to 5% comes despite recent problems in the banking sector.

“For today, it will be interesting to see how regional markets react to the slump on Wall Street overnight, on the back of the much hyped 25bps increase. Though sentiment may turn cautious, we reckon buying activities to persist within the regional markets post the Fed’s decision,” said Rakuten Trade Sdn Bhd in a note.  

The trading platform anticipated the FBM KLCI index to trend within the 1,405-1,420 points range, with interests returning to the oil & gas stocks, underpinned by improving crude oil prices as Brent crude edged closer to US$77 per barrel.

After sliding 111 points or 7.4% or from a year-to-date high of 1,502 points (Jan 25) to a low of 1,391 (March 16), KLCI may continue to stage a further rebound, supported by a recovery in the global markets and bottoming up technical readings, said Hong Leong Investment Bank (HLIB) in a note.

“If the immediate resistance at the 1,423-1,433 gap is successfully filled, the index may be propelled towards more formidable obstacles at the 1,444-1,464 levels,” said analyst Ng Jun Sheng.

The US Fed on Wednesday (March 22) enacted a quarter percentage point interest rate increase, expressing caution about the recent banking crisis and indicating that hikes are nearing an end.

Along with its ninth hike since March 2022, the rate-setting Federal Open Market Committee (FOMC) noted that future increases are not assured and will depend largely on incoming data.

“The Committee will closely monitor incoming information and assess the implications for monetary policy,” the FOMC’s post-meeting statement said.

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