PETALING JAYA: Hints of an escalating trade tension between two economic giants, coupled with profit-taking after four consecutive days of rallies, sent the FBM KLCI down.
Positive sentiments from the reopening of businesses in several states implementing the conditional movement control order (CMCO) were negated by US President Donald Trump, who hinted at escalating the trade war with China.
This saw the benchmark index of Bursa Malaysia shedding 31.39 points, or 2.22%, to close at 1,376.59 points yesterday.
Once again, the FBM KLCI failed to extend its stay above the 1,400-point mark and even slipped below its support level of 1,380 points.
Regional markets were in a sea of red as the US upped its blame game on China.
On Sunday, he threatened to terminate the first phase of the trade deal that was inked with China in January should it fail to purchase US$200bil or more of American goods and services.
Out of the 30 constituents of the FBM KLCI, 29 of them saw their stock prices decline while Sime Darby Bhd remained unchanged at RM2.
IOI Corporation Bhd dipped the most in the index, closing 16 sen or 3.94% lower at RM3.90.
Across the broader stock exchange, market breadth was negative with 599 losers as compared to 284 gainers while 356 remain unchanged.
Turnover dropped to 5.47 billion shares valued at RM2.48bil from 5.85 billion shares worth RM3.35bil last Thursday.
Most banking counters were also down ahead of the monetary policy committee (MPC) meeting today in which research houses have been predicting a 50 basis points (bps) cut.
Key Asian markets were mostly in the red with Hong Kong’s Hang Seng Index leading the pack with a 4.18% decline while Japan’s Nikkei 225 dropped 2.84%.
MIDF Research senior analyst Imran Yassin Md Yusof said the FBM KLCI tracked the performance of regional peers, which could be due to the renewed tensions between the US and China.
“We also believe that investors could be taking advantage by locking in gains that were seen last week, ” he said.
Asked if expectations of a cut in the overnight policy rate (OPR) by Bank Negara weighed on the index yesterday, Imran said it was unlikely as it would have been priced in earlier.
CGS-CIMB Research said in a note that the conditional MCO which began yesterday provided some reprieve for earnings of sectors allowed to reopen but the earnings recovery could be slow in the near term as consumers and businesses may stay cautious in the early days of the relaxation of the MCO, over fears of a second wave of Covid-19.
It added that the conditional MCO will be positive for the brewer, retailer, property developer, auto, manufacturing and REIT sectors as cash flows and earnings pressure could ease. The research house said the conditional MCO will have minimal impact on its 2020F FBM KLCI earnings growth of a negative 3.5% and a target of 1,375 points as most of the index constituents were operating. “Also, the recent 15% rise in the FBM KLCI from its year-to-date low on March 19 to 1,407 points suggests that the market has priced in the positive developments, ” it said.
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