PETALING JAYA: Last-minute selling dragged the FBM KLCI lower yesterday ahead of the long weekend, as escalating US-Israeli tensions with Iran rattled sentiment and lifted oil prices.
At the close, the FBM KLCI slipped 9.1 points, or 0.53%, to 1,720.71, rebounding from an intraday low of 1,719.93.
For the week, the benchmark index rose 1.3%.
SPI Asset Management managing partner Stephen Innes told StarBiz that the late-session sell-off was driven by a global risk reset rather than domestic factors.
“As Brent crude oil pushed toward US$118, tighter financial conditions were evident in higher yields across global bond markets amid inflationary pressures.
“And so, with the local holiday ahead, investors were unwilling to take on that risk in an uncertain geopolitical backdrop.”
Market breadth turned negative, with losers outnumbering gainers 707 to 442, signalling continued selling pressure across the broader market.
About 3.35 billion shares, valued at RM4.96bil, changed hands.
Dealers said late profit-taking ahead of the long weekend, coupled with rising geopolitical tensions, prompted investors to trim positions.
They added that the spike in oil prices and weaker regional markets weighed on sentiment, keeping risk appetite subdued, with investors adopting a more cautious stance amid uncertainty over further escalation in the Middle East.
According to Innes, the upcoming holiday creates a gap risk problem.
“Investors were effectively reducing because they cannot price what might happen while markets are closed, and 24 hours is a lifetime in this market.
“If tensions stabilise, and oil, as expected, remains anchored above US$100 a barrel, Bursa Malaysia could bounce on its commodity advantage.”
However, Innes also noted that if the energy disruption narrative escalates, the market will likely reopen defensively with volatility driven by global developments rather than local fundamentals.
“There was some profit-taking after Bursa’s recent outperformance, but the dominant driver was external,” Innes said.
The spike in oil and escalating Middle East tensions created a classic de-risk into the weekend dynamic, amplified by the holiday, where investors preferred to reduce exposure rather than hold positions through unknown headline risk.
“Traders typically don’t wait for the end of day to profit unless they are spooked,” he said.
Bursa Malaysia and its subsidiaries will be closed from today to Monday in conjunction with the Hari Raya Aidilfitri public holiday.
Around the region, MSCI’s Asia ex-Japan stock index was weaker by 2.78%.
Japan’s Nikkei 225 slid 3.83% to 53,372.53, while South Korea’s Kospi fell 2.73% to 5,763.22.
Hong Kong’s Hang Seng index dropped 2.02% to 25,500.58, China’s CSI300 declined 1.61% to 4,583.25, and the Shanghai Composite fell 1.39% to 4,006.55.
Meanwhile, Reuters reported that oil prices jumped, with Brent topping US$115 a barrel – the highest in over a week – after Iran struck Middle East energy sites following Israel’s attack on its South Pars gas field.
Innes noted that higher oil rates can appear supportive up to a point, but once it moves into the US$115 to US$120 range, it becomes destabilising.
“It starts feeding into global rates, tightening liquidity, and raising the risk of a broader growth or even credit scare, which ultimately weighs on equities including Bursa,” he said, highlighting the shift from a supportive tailwind for energy stocks to a broader macro headwind for the overall market.
“The tensions are shifting sentiment from positioning for opportunity to managing downside risk,” Innes said.
He pointed out that even though Malaysia benefits from higher oil prices and Bursa is viewed as a good relative hedge in Asia, investors were however less focused on relative winners and more concerned about what they might be walking into when markets reopen next week.
Brent surged by US$6.17, or 5.75%, to US$113.55 a barrel, while West Texas Intermediate crude rose 59 US cents, or 0.61%, to US$96.91 per barrel.
On Bursa Malaysia, Fraser & Neave Holdings Bhd
(F&N) plunged RM2.50 to RM29.30, Petronas Gas Bhd fell RM1.12 to RM16.80, Malaysian Pacific Industries slid 60 sen to RM29.60, and Hong Leong Financial Group Bhd eased 52 sen to RM20.
Gainers were led by United Plantations Bhd, up 84 sen to RM34.82, Petronas Chemicals Group Bhd rising 58 sen to RM5.48, PPB Group Bhd adding 56 sen to RM11.60, and Hong Leong Industries Bhd gaining 30 sen to RM17.10.
Among banks, Malayan Banking Bhd fell 14 sen to RM11.60, CIMB Group Holdings Bhd lost eight sen to RM7.87, Public Bank Bhd slipped six sen to RM4.87, and AmBank Holdings Bhd declined four sen to RM6.79.
In contrast, Hong Leong Bank Bhd rose 32 sen to RM22.88, while RHB Bank Bhd edged up three sen to RM8.53.
Local real estate investment trusts (REITs) also saw a decline in their share prices yesterday amid a weak broader market.
The Inland Revenue Board announced that preferential rates for the withholding tax on dividends from REITs or property trust funds would be stopped.
The Bursa Malaysia REIT Index fell 3.45% to 939.18 yesterday.
