Malaysian shares edged higher Friday, as investors cheered Prime Minister Najib Razak’s resolve to narrow the budget deficit next year.
Najib, who pledged to hand out cash aids and push for infrastructure development to stoke growth in an uncertain global environment, expects the nation’s gross domestic product to expand 4% to 5% in 2017. He forecast fiscal deficit to narrow to 3% of GDP from the 3.1% target for this year.
The nation’s benchmark FTSE Bursa Malaysia KLCI ended 0.2% higher at 1,669.98 points Friday. The index rose 0.7% for the week, tracking gains in most regional indexes.
CIMB Group Holdings, British American Tobacco Malaysia and plantation stocks led gains on Friday, while YTL Corp, Genting and Genting Malaysia slipped.
The ringgit declined 0.05% to 4.183, tracking broad gains in the dollar as the European Central Bank’s post-policy comments pushed the euro to seven-month lows.
Data released Friday showed Malaysia’s retail inflation rate rose a lesser-than-expected 1.5% last month, unchanged from August’s reading. Economists had expected a 1.7% increase in September.
“At this juncture, the balance of risks is still skewed towards growth disappointment, not to mention possible fiscal slippage, with inflation pressures of second-order concern,” said Weimen Ng, an economist at ANZ Research, in a note. “A key trigger that will bring Bank Negara Malaysia back to the rate cut table at the final meeting of the year on 23 November is a significant slowdown in private consumption.”
At today’s budget, inflation was projected at be between 2% to 3%. Malaysia’s central bank stood pat on interest rates at its September review, after delivering a surprise rate cut in July.
Regional sentiment was tepid on Friday, weighed down by broad strength in the dollar and sliding crude prices.
Crude oil prices slipped over 2% on Thursday, reversing the previous day’s gains.
The dollar index, measured against a basket, rose to its highest level since February on Friday as the euro remained under pressure after the ECB stood pat. Chatter about a possible plan to taper the central bank’s 80 billion euro a month bond-buying program rattled markets earlier this month.
ECB President Mario Draghi’s comments that a long-awaited rise in inflation required “very substantial” monetary policy accommodation also weighed on the euro.
In Southeast Asian markets Friday, Philippine’s PSE Composite and Singapore’s Straits Times slipped 0.8% and 0.4%. Indonesia’s Jakarta Stock Exchange Composite rose 0.1%, while Thailand’s SET index advanced 0.5%.
In rest of Asia, South Korea’s KOSPI and Japan’s Nikkei 225 declined 0.4% and 0.3%. China’s Shanghai Composite advanced 0.2%. Hong Kong markets were closed due to a typhoon.
On the KLCI, 15 of the 30 constituents ended lower Friday and four closed unchanged, while overall declining issues outnumbered advancing ones 392 to 327.
Foreign investors sold 15.5 million ringgit ($3.7 million) in Malaysian shares on Thursday, according to Kenanga Research.
British American Tobacco Malaysia advanced 2.7% to 49.8 ringgit, leading gains on the KLCI. The cigarette maker reports third-quarter earnings on Monday.
CIMB rose 2.2% to 5.04 ringgit. The banking major is trading at its highest level this year, helped by expectations of lower credit costs in Malaysia and Indonesia, especially in the second half of next year, analysts said.
Plantation majors Kuala Lumpur Kepong and IOI Corp rose 1.8% to 24.36 ringgit and 0.5% to 4.51 ringgit. On Friday, the government said palm oil production in Malaysia is expected to rise 5.6% in 2017. Palm oil futures were up 0.4% at 2,728 ringgit per tonne.
Plantations-to-motoring conglomerate Sime Darby ended 0.3% higher at 7.98 ringgit.
Genting Malaysia slipped 1.7% to 4.71 ringgit Friday. The leisure and hospitality major declined 1.7% for the week, trimming last week’s 2.8% rally.
Choppy trading in resort-to-rail conglomerate YTL Corporation continued Friday, with the stock closing 1.1% lower at 1.75 ringgit. The stock has alternated between losses and gains this week, ending the week 1% lower.
Gaming conglomerate Genting slipped for the second day, falling 1% to 7.87 ringgit.