Late buying support of KLCI stocks cushions impact of Cabinet’s resignation


UOB Kay Hian Malaysia Research expected only a mild reaction from the already depressed market as the KLCI is trading at its assessed trough valuation.

KUALA LUMPUR: Late buying support for key stocks Petronas Dagangan, Sime Plantation and Tenaga Nasional helped cushion the impact of the resignation of Tan Sri Muhyiddin Yassin and his Cabinet, though he will remain caretaker prime minister.

The FBM KLCI managed to erase some of the earlier losses when it fell to an intra-day low of 1,493.6 ahead of his announcement.

At 5pm, the KLCI was down 2.21 points or 0.15% to 1,502.90. Turnover was 5.03 billion shares valued at RM2.36bil. There were 377 gainers, 633 losers and 422 counters unchanged.

Reuters reported the ringgit touched a fresh year-to-date low of 4.2430 against the US dollar.

Earlier, the Yang di-Pertuan Agong Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah had accepted Muhyiddin's and the entire Cabinet's resignation with immediate effect.

However, due to the Covid-19 pandemic and that healthcare facilities in the country were in a worrying situation, the King believed holding the 15th General Election would not be the best option for the welfare and safety of the rakyat.

Analysts said Malaysian equities may temporarily weaken due to the resignation, which was widely anticipated. However, they believed a replacement candidate as prime minister could be found soon.

Meanwhile, UOB Kay Hian Malaysia Research expected only a mild reaction from the already depressed market as the KLCI is trading at its assessed trough valuation.

“We advise investors to position for a substantial recovery by 4Q21, when Malaysia crosses the vaccination herd immunity threshold. We maintain our KLCI end-21 target of 1,635,” the research house said.

Moody's Investors Service said although a period of political uncertainty may occur in Malaysia given the resignation of Muhyiddin, it expects the country’s credible and effective institutions to limit the impact on its macroeconomic policies and credit profile as demonstrated over past episodes of abrupt political change.

Christian Fang, vice president – senior analyst at the rating agency highlighted the coronavirus pandemic remains the key risk in Malaysia, as the elevated number of new infections and ongoing restrictions – although less stringent compared to the second quarter of 2020 – will continue to weigh on the economic recovery this year.

"As such, if fiscal deficits remain wide for some time because of further economic stimulus or weak revenue, resulting in a persistent rise in the government debt burden that fiscal authorities are unable to reverse, this has the potential to materially weaken Malaysia’s credit profile,” Fang said.

Among the top losers of the day were KL Kepong, which fell 60 sen to RM19.58, Hartalega 28 sen to RM6.85, CIMB and Press Metal nine sen each to RM4.51 and RM4.91 and MR DIY seven sen to RM3.79.

HLFG and Top Glove lost six sen each to RM17.12 and RM3.69 while MISC and Telekom shed four sen each to RM6.67 and RM5.76 and RHB Bank three sen lower at RM5.23.

CIMB fell nine sen to RM4.51 in active trade, Public Bank down one sen to RM3.93 but Maybank edged up one sen to RM8.06.

Actively traded GentingM added six sen to RM2.83 and Genting rose four sen to RM4.75.

Petronas Dagangan rose 20 sen to RM18.90, Sime Plantation 12 sen to RM3.63 and Tenaga nine sen to RM9.75 while Petronas Gas advanced four sen to RM15.94.

Tech and chip makers fell with SAM Engineering, which is involved in manufacturing of aviation parts, down 60 sen to RM13.70, Genetec 58 sen to RM26.68, MPI shed 46 to RM43.52, Widetec and Vitrox 22 sen each to RM3.78 anf RM18.98 while Pentamaster lost 20 sen to RM5.45.

On the external front, China blue-chips slipped on Monday after disappointing economic data raised fresh concerns over the outlook for the world's second-largest economy, but expectations of more policy support to bolster a wobbly recovery put a floor under the drop.

At the close, the blue-chip CSI300 index was down 0.1%. The Shanghai Composite index inched up 0.03% to 3,517.

Japanese shares fell on Monday as concerns of slow economic growth due to the highly contagious Delta variant of Covid-19 weighed on investor sentiment, while market heavyweights Toyota Motor and Sony Group dropped due to a stronger yen.

The Nikkei share average closed 1.62% lower at 27,523.19, marking its biggest drop since July 30. The broader Topix slid 1.61% to 1,924.98 in its sharpest drop since June 21.

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