Fed’s hawkish remarks to dampen trading sentiment

KUALA LUMPUR: The hawkish tone set by the US Federal Reserve is likely to impact trading sentiment on Bursa Malaysia and other regional markets as it signalled that interest rates are likely to be higher for longer.

Overnight, the US central bank stayed put on its Federal Fund Rate for September but suggested there could at least one more rate hike before the year was out, while also guiding that rates will be held for longer next year before the lending cuts began.

Wall Street markets tumbled on the announcement with the tech-heavy Nasdaq being the worst-hit, falling 1.5% to 13,469.

The Dow Jones slid 0.2% to 34,440 and S&P500 was down 0.9% to 4,402.

The CME FedWatch Tool, which forecasts the probability of changes to the Fed target rate at upcoming policy meetings, currently predicts a 28.5% likelihood the Fed will raise the interest rate by another 25 basis points at the November meeting, and a 71.5% change the central bank will stay put for another month.

At the opening bell, Bursa Malaysia’s benchmark FBM KLCI was up 1.21 points to 1,452.77 points.

Malacca Securities Research said domestic catalysts such as the National Energy Transition Roadmap (NETR) and New Industrial Master Plan (NIMP) blueprints could still provide thematic buying support.

“As the Fed has given a slightly hawkish outlook in the FOMC meeting, we expect the sentiment on the technology sector could be negatively affected at least for the near term.

“However, we still favour stocks that are related to the NETR and NIMP blueprints,” it said in a note.

Among blue chips, Malaysian banks were upbeat with Maybank rising one sen to RM8.87, Public Bank gaining two sen to RM4.21 and CIMB adding two sen to RM5.64.

Hong Leong Bank was the outlier, falling six sen to RM19.78.

On Bursa Malaysia’s Technology Index, counters were down 0.2% to 63.31. Stocks on the decline included Inari Amertron down two sen to RM2.87, D&O falling two sen to RM3.53 and MPI shaving six sen to RM27.

Top active counters included Tanco down 0.5 sen to 55 sen, Meta Bright rising one sen to 23.5 sen and Supermax up three sen to 88.5 sen.