Bursa Malaysia eyes 1,780 points amid cautious investor sentiment

Bursa Malaysia is anticipated to navigate a challenging trading landscape over the next three to six months, though it holds the potential to test the 1,780-point mark if investor sentiment strengthens and foreign capital flows resume. Professor Dr. Mohd. Rizal Palil from Universiti Kebangsaan Malaysia's Faculty of Economics and Management noted that the persistent absence of robust buying support from foreign institutional investors is the primary constraint on the Malaysian stock market's upward momentum.

While the US Federal Reserve's decision to maintain interest rates should ideally benefit emerging markets like Malaysia, this advantage has not been fully realized due to the still-fragile participation of foreign investors. Professor Rizal highlighted that geopolitical uncertainties and global economic shifts continue to present external risks that are difficult to control and are expected to influence investor sentiment in the near term. He identified the banking and services sectors as the main drivers of the market, owing to their strong fundamentals and resilience during uncertain economic periods.

Regarding foreign fund inflows, investors are adopting a cautious stance, influenced by several governance issues that have captured market attention. In the short term, Bursa Malaysia is expected to find support at the 1,700-point level, with the primary resistance seen around 1,740 points. Key risks to monitor include political stability, governance matters, and the necessity of introducing more investment incentives to attract foreign direct investment (FDI) and enhance the nation's capital market appeal.

On the subject of the ringgit, Professor Rizal stated that stable domestic economic fundamentals continue to bolster the local currency. However, its strengthening momentum will depend on export performance, the trajectory of the US dollar, and global economic developments. He projected that the ringgit could strengthen to around RM4.00 against the US dollar by year-end, contingent upon sustained economic growth, domestic political stability, and increased investor confidence. Bank Negara Malaysia's monetary policy is also crucial for maintaining foreign exchange market stability, especially amid high selling pressure. A stronger ringgit would reduce import costs and ease the cost of living, whereas a weaker currency would increase import costs and inflationary pressures.