KUALA LUMPUR: Bursa Malaysia will likely remain guarded in the immediate term depending on the COVID-19 development, despite Bank Negara Malaysia's move to cut the Statutory Reserve Requirement (SRR) ratio.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said market players have been responding positively to the latest SRR cut by 100 basis points, which would release RM30 billion liquidity into the financial system.
He said this would help banks reduce the cost of funds as money placed in the SRR does not yield any returns. That way, banks would have more resources to extend financing.
"Banking stocks have been staging a sharp rise on Friday as a result of the announcement. Given that banks accounted for about one-third of total FBM KLCI constituent, it was no surprise why there was a huge jump in the index.
"The next question would be how persistent and how sustainable is the rally? Again, it would very much depend on the Covid-19 development. As such, markets should remain guarded in the immediate term, ” he told Bernama.
As of Friday, Malaysia recorded 130 new COVID-19 cases, bringing the tally of infections in the country to 1,030.
Meanwhile, Affin Hwang Investment Bank Bhd said COVID-19 has taken a toll on the global equity markets which is starting to feel the sting of production supply disruptions, lost man-hours and weaker consumption spending, especially now that the virus outbreak has turned into a pandemic.
It said the pandemic, coupled with the recent oil price crisis, contributed to the heightened equity market risk premium in recent weeks.
"Therefore, we have made a downward revision in our 2020 gross domestic product (GDP) growth estimates to 3.3 per cent from four per cent previously. We expect a further downside to this view should the COVID-19 pandemic prolong, ” it said in a note.
Commenting on the two-week nationwide movement control order until March 31, it said this was a necessary course of action, although the restriction would possibly cause consumers to be more prudent in their spending, with companies categorised as "non-essential services” to be negatively affected.
It said sectors like gaming, retail REITs, consumer retailers, property and automotive sellers would be most impacted by the business closure.
On a Friday-to-Friday basis, the FBM KLCI erased 41.47 points to 1,303.28 from 1,344.75 previously.
On the scoreboard, the FBM Emas Index gave up 483.63 points to 8,842.78, the FBMT 100 Index decreased 429.66 points to 8,789.30 and the FBM Emas Shariah Index depreciated 320.85 points to 9,664.14.
The FBM 70 declined 1,121.96 points to 9,888.27 and the FBM ACE Index contracted 772.87 points to 3,519.12.
Sector-wise, the Financial Services Index reduced 1,000.83 points to 11,821.51, the Industrial Products and Services Index inched down 11.22 points to 99.75 and the Plantation Index was 90.12 points higher at 5,937.63.
Weekly turnover fell to 21.61 billion units worth RM17.35 billion from 25.01 billion units worth RM17.67 billion in the previous week.
Main Market volume declined to 16.73 billion shares valued at RM16.46 billion from 18.12 billion shares valued at RM16.47 billion.
Warrants turnover was lower at 1.68 billion units worth RM353.34 million from 2.33 billion units worth RM353.72 million.
The ACE Market volume declined to 3.18 billion shares valued at RM539.26 million from 4.64 billion shares valued at RM838.56 million. - Bernama
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