KLCI lower as GE14 draws nearer


The bears have managed to halt the bulls on Bursa Malaysia as investors take a risk-off approach ahead of the polling day tomorrow, in what many believe will be a closely contested general election.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) finished lower in four trading sessions, sliding 13.6 points, or 0.74%, yesterday to the 1,828- point level on broad-based selling.

The small-cap index fell by 183.26 points, or 1.26%, to settle at 14,392.4 as retailers were on profit-taking mode. Trading volume was 1.92 billion shares valued at RM2.1 billion.

Rakuten Trade Sdn Bhd VP of research Vincent Lau believes the market will hold its psychology level of 1,800 points after having to test the 1,821-level yesterday.

“These days before the 14th General Election (GE14) will see a rather lack lustre trading as investors will not be taking any major actions,” he told The Malaysian Reserve when contacted recently.

Foreign investors turned net sellers for the first time in four weeks, selling RM438.4 million net last week, the second-highest weekly outflow so far this year, an MIDF Research note yesterday revealed.

The research firm believes the FBM KLCI will probably stage a relief rally on Thursday after GE14.

“This can be reflected in an influx of foreign inflows, assuming the federal ruling incumbent retains its position,” it added.

Oanda Corp head of trading for Asia Pacific Stephen Innes said the ringgit is struggling ahead of two key events, the Bank Negara Malaysia policy statement and the general election.

“GE14 has turned out to be a much more hotly contested election run than what anyone had thought. Given this uncertainty, investors have been very tentative to re-engage the ringgit due to the possibility of a large-scale knee-jerk negative repricing of Malaysia on the slight chance the Opposition pulls out a surprise,” Innes said.

He believes investors are taking little for granted after the Brexit and US President Donald Trump surprises.

AllianceDBS Research Sdn Bhd head of research Bernard Ching said investors will refocus on fundamentals post- GE14 if the incumbent remains in power, and there’s potential for a 6% gain with the benchmark index hitting 1,950 points by year-end.

“Our base case assumes that the status quo will be maintained, which will see the election overhang easing post- GE14, as investors focus on fundamentals again.

“Against the backdrop of sustained economic growth, we expect the equity market to resume its upward trajectory and reiterate our end-2018 FBM KLCI target of 1,950,” Ching wrote in a report last week.

He added that laggard midand small-cap stocks will likely be rerated, given the attractive valuations and when investors regain their risk appetite.