FBM KLCI loses RM20b in value on inflation risk, election uncertainty

Nearly all of Bursa Malaysia’s indices were in the red, except for the property index which ended 1.05 points higher


INFLATION worries wiped off more than RM20 billion in valuations from the FTSE Bursa Malaysia KLCI’s (FBM KLCI) 30 constituents amid concerns of a temporary spike in inflation in the second quarter of this year (2Q21).

The benchmark index fell by 35.68 points or 2.2% to a one-month low of 1,569.77 as all 30 of the largest stocks on the local exchange ended in negative territory.

Top Glove Corp Bhd posted the sharpest intraday decline, falling by 5.4% or 26 sen to close at RM4.52. Hartalega Holdings Bhd also saw its share price fall by 4.59% or 43 sen to RM8.93, which wiped off RM1.47 billion from its market valuation.

Glove stocks took hits yesterday after the US Customs and Border Protection ordered its personnel at all US ports to seize disposable gloves produced in Malaysia by Top Glove.

Other top decliners included Sime Darby Plantation Bhd which fell by 4.33% or 21 sen to RM4.64 and Axiata Group Bhd (down 3.69% or 14 sen to RM3.65).

An analyst, who spoke on condition of anonymity, told The Malaysian Reserve that he foresees further downside risk to the FBM KLCI’s steep drop yesterday as investors continue to price in inflation risks and election uncertainty.

“I expect the worst should be near as yesterday saw a sharp drop. We will likely see a rebound in the near term. Nevertheless, there is also another event in the pipeline as election risks may heighten in the 3Q or 4Q,” he said.

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus expects Malaysia’s headline inflation to spike temporarily above 5% in 2Q21 due to a lower base from low fuel prices in 2Q20, and average at between 2.5% and 4% in 2021.

Headline inflation, which measures the total inflation within an economy, including commodities such as food and energy prices, stood at -1.2% in 2Q20 as the country went into complete lockdown to curb the spread of Covid-19.

On the broader market, losers thumped gainers by 858 versus 304, while 369 counters were unchanged and 671 untraded. Total volume stood at 8.49 billion shares worth RM4.23 billion.

Nearly all of Bursa Malaysia’s indices were in the red, except for the property index, which ended 1.05 points higher at 754.27 points after hitting a high of 756.88 and low of 749.22 in intra-day trade.

Read our previous report here

FBM KLCI sinks to a 10-year record low