FBM KLCI declines another 2%, but 1,800 support level holds for now

The overnight plunge of 1,175 points in the Dow Jones on Monday leaves markets jittery


The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) fell in tandem with global markets, as Prime Minister Datuk Seri Mohd Najib Razak announced meaures to boost capital market growth.

The FBM KLCI dropped 2.2%, or 40.62 points, to 1,812.45 yesterday as market breadth was negative, while losers led gainers by 1,215 to 121 counters.

The overnight plunge of 1,175 points in the Dow Jones Industrial Average on Monday left markets jittery with selling spreading on Bursa Malaysia.

The benchmark FBM KLCI declined below the 1,800-level mark in early trade to 1,795.85, or 57.5 points down day-on-day, before light buying in the afternoon session erased some of the losses helped by the market positive measures announced by Najib at the fifth World Capital Markets Symposium 2018 in Kuala Lumpur yesterday.

Rakuten Trade Sdn Bhd research VP Vincent Lau said the prime minister’s market-friendly initiative announcements helped limit losses.

“The measures announced could bring much needed vibrancy and catalyst to the local stock market that has been overwhelmingly negative in the morning,” Lau told The Malaysian Reserve.

The market action was perhaps the worst for the broader market in many years, as the market breadth was overwhelmingly negative, he added.

Hap Seng Consolidated Bhd and YTL Corp Bhd were the biggest decliners, decreasing 6.7% and 6.67% respectively.

Financials such as Hong Leong Financial Group Bhd and CIMB Group Holdings Bhd decreased by 5.16% and 3.10% respectively, as total market volume increased to 5.2 billion shares and doubled the 2.6 billion shares traded on Monday.

After hitting a 21-month high of RM3.87 against the greenback last week and gaining 12% over the course of a year, the ringgit eased to RM3.91 mark in response to the slump in global equity markets.

Meanwhile, a senior foreign-exchange (forex) trader said the selloff across global markets spilled over into forex markets on concerns the US Federal Reserve will adopt an aggressive approach to interest rates in response to inflationary pressures.

“Traders are now adopting a riskoff approach whereby they are buying US dollar and other high-risk currencies, triggering a mini crisis across markets,” the currency trader said.

If the FBM KLCI can hold above the 1,800-point level, this will indicate that investors are taking longterm positions on Malaysian equities, the forex trader added.