KUALA LUMPUR, July 18 ― Bursa Malaysia is expected to straddle at the 1,600-point level with an upside bias next week on mixed external developments, dealers said.

AxiCorp chief global market strategist Stephen Innes said the market could continue to grind higher due to optimism on Covid-19 vaccine development.

US biotech firm Moderna Inc has reportedly found a Covid-19 vaccine to induce immune responses in all of the Phase 1 volunteers and would enter the final stage of human trials for its vaccine on July 27.

On the negative side, Innes said the market would also be digesting the worse-than-expected retail sales data from China.

China’s retail sales in June dropped by 1.8 per cent year-on-year, much worse than the predicted 0.3 per cent growth, after a 2.8 per cent decline in May. This suggests that consumers are not spending and reflects poorly for what is expected to be a consumer-driven economic recovery, and this may hurt regional economies like Malaysia that has strong export ties with the republic.

In addition, Innes told Bernama that the stable oil prices, despite the expectation by the Organisation of the Petroleum Exporting Countries (Opec) to rewind production, will be favourable for the oil and gas counters.

Oil cartels agreed to scale back the production cuts of 9.7 million barrels a day enforced in May to 7.7 million barrels per day from August in a move to support the recovery in crude prices.

The Brent crude and West Texas Intermediate were both steady at above US$43 (RM183.29) and US$40 per barrel respectively yesterday.

"In addition, the focus will be on the European Union (EU) summit this weekend, so mixed messaging is also hurting sentiment on the global level,” he added.

There is hope that some form of deal can be achieved with respect to agreement over the EU's proposed €750 billion recovery fund.

In addition, investors will also closely monitor the upcoming central bank meetings ― Monetary Policy Meeting on July 22 and the US Federal Open Market Committee meeting on July 28-29.

Looking ahead, the US Federal Reserve is expected to keep rates steady but will continue to signal that rates will remain low for as far as the eye can see which will ultimately support risk sentiment.

Meanwhile, Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said investors will focus more the latest developments surrounding the escalating tensions between the US and China as President Donald Trump's administration is considering a ban on travel to the US by members of Chinese Communist Party and their families.

"Historically, any negative development of the relationship between the US and China will adversely affect Asian equities as a whole,” he said.

This week, the White House has rejected nearly all Chinese maritime claims in the South China Sea, causing worries among the investors, and Trump said he had signed a legislation that would sanction China in response to the crackdown on political dissent in Hong Kong.

Following this, China has vowed to retaliate against the US and will make necessary responses to protect its legitimate interests and impose sanctions on relevant US personnel and entities, further raising worries over the escalating trade war.

For the week just ended, the key index FTSE Bursa Malaysia KLCI (FBM KLCI) was supported by positive vaccine developments and rally in healthcare stocks, amid strong buying in glove makers’ stocks.

On a Friday-to-Friday basis, the index rose 4.49 points to end at 1,596.33 from 1,591.84 last week.

On the scoreboard, the FBM Emas Index increased 65.64 points to 11,272.45, the FBMT 100 Index gained 68.83 points to 11,130.21, while the FBM Emas Shariah Index added 187.33 points to 12,999.28.

The FBM 70 expanded 235.89 points to 14,052.74 and the FBM ACE Index climbed 315.25 points to 7,490.9.

Sector-wise, the Plantation Index increased 107.74 points to 6,968.82, the Financial Services Index advanced 30.80 points to 13,577.44 but the Industrial Products and Services Index eased 0.38 of-a-point to 138.68.

Weekly turnover decreased to 45.32 billion units worth RM28.93 billion from 47.26 billion units worth RM24.58 billion in the previous week.

Main Market volume declined to 21.69 billion shares valued at RM23.41 billion from 27.37 billion shares valued at RM20.36 billion.

Warrants turnover widened to 4.96 billion units worth RM1.97 billion from 3.34 billion units worth RM1.26 billion the week before.

The ACE Market volume went up to 19.08 billion shares valued at RM3.35 billion from 16.54 billion shares valued at RM2.96 billion. ― Bernama