FBM KLCI bounces back on BNM’s OPR cut

At yesterday’s close, the benchmark FBM KLCI rose 0.8% or 11.7 points to 1,478.64 points

by SHAZNI ONG/ graphic by MZUKRI

THE cut in the Overnight Policy Rate (OPR) cut by 25 basis points to 2.5% by Bank Negara Malaysia (BNM), amid continuous fear from the Covid-19 virus outbreak, inspired a bounce in the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) following Monday’s losses.

At yesterday’s close, the benchmark FBM KLCI rose 0.8% or 11.7 points to 1,478.64 points with gainers narrowly overturned losers by 456 to 410, while 396 unchanged and 736 untraded.

For this quarter to date, the local bourse has fallen 6.9%, heading for the biggest decline since the second quarter of 2018.

Public Bank Bhd led the index higher with its shares rising 3.98% or 68 sen to RM17.76, followed by Hong Leong Bank Bhd which rose 58 sen to RM15.60 and Nestle Malaysia Bhd up 50 sen to RM140.70.

Malaysia Airports Holdings Bhd led the laggards, falling 2.05% or 13 sen to RM6.22, followed by CIMB Group Holdings Bhd which eased 10 sen lower to RM4.50 and IHH Healthcare Bhd falling eight sen to RM5.60.

The Bursa Malaysia Finance Index, which tracks all the banking/financial stocks, rose 1.16% or 164.6 points to 14,313.32 points on the OPR cut. The move is the biggest since rising 1.7% on Dec 18, 2019.

“In our view, the two rate cuts have already been priced in. The difference in opinion may be in the matter of timing. “Hence, we did not see any significant share price movement,” MIDF Amanah Investment Bank Bhd senior analyst Imran Yassin Yusof told The Malaysian Reserve (TMR) yesterday.

Affin Hwang Asset Management senior portfolio manager Ahmad Raziq Ab Rahman said the latest OPR decision was widely expected.

“The recent fiscal stimulus announcement has helped ease the pressure off BNM to act aggressively. We believe the risk to the economy continues to be on the downside should the Covid-19 outbreak escalate or is prolonged.

“A further OPR cut is possible, though there is a need to monitor global market developments and data-front. With inflation expected to be slightly higher in 2020, there is still room for further cuts.

“Yield levels are likely to remain low in the near term due to the accommodative environment,” he told TMR yesterday.

Another analyst with a local research firm opined that Tan Sri Muhyiddin Yassin’s appointment as prime minister (PM) has ended the political stalemate temporarily, but volatility is expected to persist in the local market.

“Without a strong mandate or a solid support base, the PM could face challenges in pushing through policy decisions or may even find himself challenged again, either from his coalition or through a vote of no confidence if the Parliament reconvenes next week.

“On top of the political uncertainty, the economy faces additional headwinds from the Covid-19 with the government reducing its growth outlook for 2020 to 3.2%-4.2% from 4.8% previously,” the analyst said.

The analyst added that there are concerns if the RM20 billion fiscal stimulus package unveiled last week by interim PM Tun Dr Mahathir will proceed or a new stimulus package will be announced.

“Nonetheless, any government whether old or new will be under a lot of pressure to implement policies to support economic growth and shore up support. For now, we expect the market to trade flattish until there is more stability and policy clarity,” the analyst said.