Bursa Malaysia falls below critical 1,600 level as global markets roil

The plunge in the shares is mainly influenced by declines in finance, industrial products and healthcare-related stocks, says analyst


THE FTSE Bursa Malaysia KLCI (FBM KLCI), Malaysia’s gauge of the 30 largest stocks, closed below the critical 1,600 level yesterday as global markets roiled amid ongoing protests in Hong Kong, fears of a protruded US-China trade war and a crash in Argentina’s stocks and currency.

The FBM KLCI plunged 1.37% or 22.17 points to close at 1,592.88 yesterday, marking its biggest move since falling 1.44% on Oct 23, 2018, as foreign investors took a risk-off mode and existed local bank stocks like Public Bank Bhd.

“Markets were all in the red with global uncertainties on the trade war taking their toll on economies, coupled with recent central banks cutting rates. US bond yields hitting lows also spooked already-fragile markets,” Rakuten Trade Sdn Bhd research VP Vincent Lau told The Malaysian Reserve (TMR).

Weaker earnings for the second quarter (2Q) from Petronas Chemicals Group Bhd did not help the sentiment and drove investors out of other Petroliam Nasional Bhd counters like MISC Bhd, Petronas Dagangan Bhd and Petronas Gas Bhd.

Other decliners include Tenaga Nasional Bhd, Genting Bhd and Genting Malaysia Bhd, which were collectively responsible for close to 14 of the 22 points drop. In Asia, Hong Kong equities took the biggest hit as the region’s airport suspended flights for a second day amid anti-government protests, while Japan’s Topix Index shed its gains for the year.

The Stoxx Europe 600 Index recorded a third straight day of decline, weighed down by industrial and banking stocks. Argentina’s peso and shares crashed after a surprise primary election result which saw President Mauricio Macri losing by a larger margin than expected.

Japan’s Nikkei 225 lost 1.11% and South Korea’s Kospi Index shed 0.85%.

“It may be challenging moving forward, depending on the outcome of the ongoing 2Q results season,” MIDF Research head of research Mohd Redza Abdul Rahman told TMR.

Since the start of the year, the FBM KLCI has declined 5.78%, while the FTSE Bursa Malaysia Small Cap Index is up 14.57% year-to-date (YTD) and the FTSE Bursa Malaysia Mid 70 Index is 8.32% stronger.

“The last time the FBM KLCI closed below 1,600 was in August 2015. We expect the FBM KLCI to rebound above 1,600 soon, as it is an important psychological level,” Rakuten’s Lau said, adding that the market reaction yesterday is only temporary.

Mohd Redza also said the plunge in the FBM KLCI was mainly influenced by declines in finance, industrial products and healthcare-related stocks.

“Sectors like construction, energy and telecommunications are still sitting on YTD gains. Not all is bad despite the FBM KLCI decline…trading volumes have been good since July too. Exporters will likely benefit from the weakness in the ringgit, provided that the demand for their products stays resilient,” he said.

The ringgit fell towards a two-month low yesterday at 4.194 to the US dollar on growing foreign outflows and stress signals in the global economy.

“Chart-wise, the index has been in a bear mode for the past months. The next critical support is at the 1,570 level,” said a chartist at a local brokerage.

The sell-off comes as local equities saw the largest weekly foreign net outflow in 12 weeks last week, with foreign selling jumping to RM1.04 billion net for the week ended Aug 9 from RM601.2 million the week before.

In its weekly fund flow report yesterday, MIDF Research said last week’s “massive net outflow” brought the YTD foreign net outflow from Malaysia to RM6 billion, equivalent to around 51% of last year’s total foreign net outflow.