Political turmoil adds pressure on market

Benchmark FBM KLCI closed 21.44 points lower yesterday at 1,508.71, its lowest since November last year 


THE local equity market is expected to remain under pressure due to the negative business environment caused by the Covid-19 pandemic restrictions and further worsened by the political uncertainty that has triggered selling pressure on Bursa Malaysia. 

The benchmark FTSE Bursa Malaysia (FBM) KLCI closed 21.44 points lower at 1,508.71 yesterday, its lowest level since November last year. 

Rakuten Trade Sdn Bhd VP Thong Pak Leng told The Malaysian Reserve (TMR) that Umno’s decision to withdraw support for Prime Minister Tan Sri Muhyiddin Yassin is expected to hamper trading of the local bourse. 

“With the FBM KLCI performance already in the doldrums, the latest developments will certainly put additional pressure on its performance,” he said, projecting the index would hover around the 1,500 points level. 

Selling was widespread with 1057 counters closing lower as opposed to 147 counters rising. Investors sold index-linked counters like Nestle (M) Bhd, CIMB Group Holdings Bhd, Kuala Lumpur Kepong Bhd, PPB group Bhd and Malaysian Airports Holdings Bhd, among others.

Technically, the trend of the FBM KLCI was down for the short-, medium- and long-term timeframe, a chartist with a local brokerage said, adding that a break below the 1,500-point levels could see it head towards the 1,470-point level. 

Umno president Datuk Seri Dr Ahmad Zahid Hamidi said in a press conference that the Perikatan Nasional government had failed in managing the economic recovery and the pandemic crisis nationwide. 

Economist Dr Nungsari Ahmad Radhi said the political turmoil and the government’s inability to contain the pandemic has adversely affected investor sentiments. 

If both issues remain unresolved, he expects investor sentiments to deteriorate further in the second half of the year. 

“The only bright spot so far is the increased vaccination rate the last fortnight or so. They have to contain and stabilise the pandemic or sort out the politics, preferably both, to make 2021 a better year,” he told TMR. 

He opined that sentiment had not been positive prior to Umno’s announcement as the government’s failure to effectively manage the pandemic has led to the downward revision of the country’s growth prospects. 

Investors have priced in the negative political sentiment following the proclamation of Emergency and suspension of Parliament. 

“Foreign-exchange markets are slowly reflecting it and the equity market had seen a slide the last month especially. 

“As a single event, yesterday’s development was neutral in an already negative sentiment that had priced in these uncertainties,” he said. 

He opined there are also not many defensive stocks that investors could turn to now as favoured counters like latex and medical-related have suffered from concentration risks. 

“Commodities, including oil and gas, look good as the global economy recovers and those that have been severely discounted may see good rebounds. Property and most retail/ wholesale will take a while,” he said.