Market Close KLCI falls 0.4%, ringgit weakens on US rate hike prospect

by **Cals** Fri 01 Aug 2014, 02:10

Market Close KLCI falls 0.4%, ringgit weakens on US rate hike prospect

Business & Markets 2014

Written by Chong Jin Hun of theedgemalaysia.com

Thursday, 31 July 2014 18:12

KUALA LUMPUR (July 31): The FBM KLCI fell 6.98 points or 0.4%, mirroring major Asian markets, as the prospect of a US interest rate hike prompted funds flows back to the world's largest economy. The ringgit weakened against a strengthening US dollar.

In Malaysia, the KLCI settled at 1,871.36 at 5pm on losses in stocks like Petronas Dagangan Bhd and Hong Leong Financial Group Bhd. Analysts said investors were eyeing US monetary policy and Malaysian corporate earnings during the current financial reporting season here.

"The KLCI is still under consolidation," Kenanga Investment Bank Bhd research head Chan Ken Yew told theedgemalaysia.com over telephone today.

Chan, who spoke from a technical viewpoint, said as long as the KLCI failed to surpassed the 1,880-point level, the index could see downward pressure.

Bursa Malaysia saw 2.51 billion shares worth RM2.53 billion changed hands. There were 349 gainers versus 515 decliners.

Dutch Lady Milk Industries Bhd was the top gainer while British American Tobacco (M) Bhd led decliners. The most-active stock was Sumatec Resources Bhd.

The ringgit weakened to RM3.1965 versus the US dollar at 4.39pm as demand for US dollar-denominated assets generated demand for the foreign currency.

Reuters reported that the 10-year U.S. debt yield jumped to as high as 2.569 percent, posting its biggest daily rise since November. It last stood at 2.55 percent. Two- and three-year note yields rose to their highest in three years.

The U.S. dollar index rose above two of its recent peaks - one hit in January and the other in November - to its highest level in almost 11 months. The index rose to as high as 81.545 on Wednesday and last stood at 81.387, having risen 2.0 percent this month.

Across Asia stock markets, Japan's Nikkei fell 0.16% while Hong Kong's Hang Seng added 0.1%.

Reuters reported that while the prospect of a solid U.S. recovery underpinned equities, many Asian shares slipped on profit-taking after making hefty gains since the middle of this month.

The US GDP data increased expectations that the Fed is moving closer to an interest rate hike that many expect will occur next year if the economy continues to gain momentum.