Floods, Omicron risks dampen investor sentiment

This causes the FBM KLCI to decline some 8.11 points or 0.54% to end at 1,493.90 yesterday 


MALAYSIA’S worst flash flooding in years coupled with fears over the spread of the Omicron variant could negatively impact economic recovery, dampened investors’ sentiment on the local stock market. 

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) declined 8.11 points or 0.54% to end at 1,493.90 yesterday with 682 decliners while 244 securities gained while another 1,378 securities were untraded or closed unchanged. 

Rakuten Trade Sdn Bhd equity research VP Thong Pak Leng said the risks of flooding worsening was negative to the overall market sentiment, made worse by the weaker investor sentiment globally. 

“Additionally, fears over the spread of the Omicron variant caused European countries to impose stricter control on movements and triggered selling in equities around the world,” he told The Malaysian Reserve (TMR) yesterday. 

The FBM KLCI was dragged down by stocks like Tenaga Nasional Bhd which fell 21 sen to RM9.30, Hong Leong Bank Bhd (down 30 sen), Petronas Gas Bhd (down 12 sen) and Malaysia Airports Holdings Bhd (slid nine sen). 

Thong added that the spread of the Omicron variant has fuelled fears that renewed curbs on business and travel might worsen supply chain disruptions and boost inflationary pressures. 

As for the local bourse, he expects sentiment to continue to remain cautious and reckon external uncertainties to be a major setback. 

“We anticipate the FBM KLCI to hover within a wider range from 1,485 to 1,500 for the remainder of the week. 

“From a technical point of view, we see immediate resistance at 1,500 while support at 1,475,” he said. 

The Health Index was the only index to gain some 5.87 points yesterday as the new variant saw some buying interest in glovemakers like Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd. 

The FBM FLG or fledgling index was 228.37 points lower at 19,624.46, the FBM MidS Cap was 197.64 points lower at 18,510.78, the FBM Asian Palm Oil was 195.42 points lower at 15,213.05, the FBM MidS Cap Shariah was 188.55 points lower at 18,323.94 and the FBM 70 was 177.39 points lower at 13,822.46. 

The FBM Emas Index was 80.29 points lower at 10,840.03, the FBMT 100 Index fell 75.36 points to 10,547.35, the FBM Emas Shariah Index fell 105.50 points to 11,639.13 and the FBM ACE declined 70.92 points to 6,206.90. 

Sectoral wise, the Financial Services Index erased 39.04 points to 15,244.04, the Plantation Index fell 77.67 points to 6,429.97, and the Industrial Products and Services Index fell 2.27 points to 194.53. 

The Property Index lost 8.09 points to 682.04, the Transportation and Logistics Index fell 8.64 points to 839.41, and the Utilities Index fell 8.06 points to 855.79. 

The REITs Index was 6.67 points lower, followed by the Telecommunication and Media Index, and the Technology Index recording 1.79 and 0.96 lower, respectively. 

The flash floods are expected to put pressure on the federal and state governments as continued rainfall is speculated to increase the number of evacuees. 

Although the official estimates of total economic losses have yet to be determined, some economic analysts have predicted that the losses could reach more than RM500 million. 

The Federation of Malaysian Manufacturers president Tan Sri Soh Thian Lai told Reuters that the floods which resulted in massive damage and evacuation over the weekend, could have caused significant losses to businesses in the affected areas. 

He noted that the damage to property, other assets and products as well as production disruption have impacted industries in Shah Alam and Klang districts. 

From an economist’s point of view, Centre for Market Education CEO Dr Carmelo Ferlito said flood is nobody’s fault and the government should focus on the speed of response and be prepared to readily respond. 

“The slow response can be — at least partially — attributed to the whole focus being on the Covid-19 pandemic. 

“Something unexpected happens and then everybody is caught by surprise and unable to respond properly,” he told TMR yesterday. 

Ferlito added that the event demonstrates how a strategy focused on covering only one problem can create many holes in the economy, in the healthcare system and different types of emergencies.