KLCI feels the gloom of regional markets

by **Cals** Wed 30 Sep 2015, 22:08

KLCI feels the gloom of regional markets

By Supriya Surendran / The Edge Financial Daily | September 30, 2015 : 10:11 AM MYT

KUALA LUMPUR: The FBM KLCI drifted lower yesterday as sentiment was dampened by the heavy selldown in some regional markets amid growing concerns of repercussions caused by the continued weak commodity prices in the global economy.

The fall was led by Tokyo’s Nikkei 225 Index, which plunged 714.27 points, or 4.05%, to 16,930.84 points. Meanwhile, Hong Kong’s Hang Seng Index slid 629.72 points, or 2.97%, to 20,556.6 points, and Shanghai’s Stock Exchange Composite Index declined 62.62 points, or 2.2%, to 3,038.14 points.

On Bursa Malaysia, the FBM KLCI dropped 5.11 points, or 0.32% to close at 1,603.32 points, after it hit a day’s low of 1,595.22 points.

[size=16]Etiqa Insurance and Takaful head of research Chris Eng opined that the weakness in regional markets was dominated by technical plays, with fundamentals playing a smaller role.

“The slowdown in regional markets is more of a negative sentiment play following the uncertain lift-off of US interest rates, and to a lesser degree weak economic data coming from China,” he told The Edge Financial Daily.

Another factor that has irked investors is the “Glencore effect” that sparked renewed concerns about the adverse impact on weak commodity prices to corporate earnings and companies’ financial health.

Glencore plc’s share price plunged 29% in London on Monday, and 27.5% in Hong Kong yesterday as investors worried about its ability to service its debts.

On the local front, the ringgit depreciated to a new point at 4.4812 against the US dollar yesterday, ahead of the maturity of some RM11 billion worth of Malaysian government bonds today, that has led to concerns that foreign redemption would add more pressures on the local currency.

However, Areca Capital Sdn Bhd chief executive officer Danny Wong pointed out that the weak ringgit cannot be seen as the main contributing factor to the downward trend on the local stock market.

“Looking at the other regional markets, their currencies have also slumped as well, so it is not a situation that is unique to Malaysia.

“However, like other regional markets, we are affected by the global factors that are in play now, such as the performance of the US markets, and the US Federal Reserve’s decision (on interest rates). Looking at the situation right now, I think the market will be hovering at its current levels for a while” said Wong.

TA Securities technical analyst Stephen Soo said that the KLCI will see some choppy trade for the last quarter of 2015.

“The last quarter of 2015 can basically be summarised as a [global] counter balancing act, between the weak economic data from China, with the anticipated quantitative easing efforts from the European Central Bank, and the US Federal Reserve’s decision on interest rates, and investors are going to be weighing in on this effect.

“[Closer to home] there is the tabling of the budget in October, which historically does trigger some investor interest building up to that, which may see a pre-budget rally for certain sectors. With the combination of these factors it will be choppy trade for the FBM KLCI in the last quarter” said Soo.
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