Some Developments in the World Market

There have been a few key developments in the world that might have implications to the stock market:

China

The China Securities Regulatory Commission (CSRC) said on Friday it had banned Citic Securities, Haitong Securities and Guotai Junan Securities, the largest brokerages by assets, from opening new margin trading accounts for three months, following investigations into high-risk margin trading. It was believed that margin trading account facilities has played a role in taking the Shanghai Composite to its highest close in 65 months on Friday. Marrgin financing, which allows investors to borrow money to buy into the stock market, has helped power the equities rally, with outstanding margin loans standing as of Friday at Rmb767bn ($123bn), according to Shanghai Stock Exchange data, from Rmb444bn at the end of October. [Source: www.ft.com].

Shanghai Composite Index closed 7.7% lower due to the move.

US

US market has been bullish last year with all time high recorded for Dow Jones and S&P. It has retraced a bit since beginning of the year but has managed to record its first gain after 5 consecutive sessions of red for both DOW and S&P. Outlook is still positive with stronger US dollar and better economic outlook. The world is now waiting to see when is the interest rate hike taking place.

Euro Area

Focus remains on whether ECB will introduce full scale bond buying program via QE. In general, market believes that the ECB meeting on coming Thursday is the right time or critical time to have the QE introduced.

Oil

Oil fell after Iraq said it’s producing a record amount of crude. West Texas Intermediate oil slid 1.4 percent to $47.99 a barrel in the morning US time. Looks like energy sectors is going through turbulence with oil price gone up one day and slid the next day.

Malaysia

Weaker Ringgit, low oil price, weak commodities prices, GST, are going to be the theme this year for KLCI. Market sentiment remains very negative with current economic environment. To add salt to the wound, there is uncertainty in the economic outlook and on how government is able to cruise through the turmoil with lesser income due to lower oil price, and also the “scandalous” 1MDB issues. In the near term, it is probably the table of budget revision due to falling oil price that is going to catch the attention of the public, particularly among the investors.

 

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