KUALA LUMPUR (Aug 5): Malaysian stocks extended their sharp decline on Monday, with the country’s benchmark index on course for its worst day in more than a year, as Asian stocks continued to tumble on fears over the health of the US economy.
The FBM KLCI dropped as much as 47.59 points, or 2.95%, to 1,563.46 during the morning session. As of 9:54 am, the index had fallen 39 points, or 2.42%, to 1,572.05. The FBM Mid 70 was also down by 3.39% to 17,295.10. Meanwhile, the FBM Small Cap Index declined 4% to 18,027.79, while the FBM ACE Index was down 4.38% to 5,230.65.
Leading the losses among the top 30 component stocks on FBM KLCI were YTL Power International Bhd (KL:YTLPOWR), which declined 29 sen or 6.46% to RM4.20, giving it a market capitalisation of RM36.22 billion. Meanwhile, its parent company, YTL Corp Bhd (KL:YTL), decreased 20 sen, or 6.15%, to RM3.05, translating to a market capitalisation of RM34.99 billion.
Among the sectors that dragged the most on Bursa were technology, which declined by 4.45%, followed by property (4.09%), industrial products and services (4.07%), and construction (3.9%).
In the broader market, 1,466 counters were losers, 56 were gainers and 134 traded unchanged. Bursa’s total volume stood at 3.26 billion units, while total value was RM1.88 billion.
Pegasus Heights Bhd (KL:PHB) led the top active stocks, with its share price falling half a sen or 50% to half a sen. Velesto Energy Bhd (KL:VELESTO) fell one sen or 4.65% to 20.5 sen, while MyEG Services Bhd (KL:MYEG) fell seven sen or 7.22% to 90 sen.
WCT Holdings Bhd (KL:WCT), which was also among the most traded counters, dropped as much as 17 sen or 15.18% to 95 sen during the morning session before paring its losses to RM1.06. Bursa suspended its intraday short-selling (IDSS) after the counter dropped more than 15% or 15 sen from its reference price. The stock’s IDSS will only be activated on Tuesday 8:30am.
Monday’s session saw a drop in export-trade sensitive Asian equities, with Taiwan’s Taiex tumbling 7.83%, Japan’s Nikkei falling 5.88%, and South Korea’s Kospi declining 5.16%. Last Friday, the Nasdaq Composite Index fell 2.43%, the S&P 500 fell 1.84%, and the small-cap Russell 2000 fell 3.52%.
Rakuten Trade sees the drastic selling as merely a knee-jerk reaction, as traders treat this as an excuse to lock in profits.
“We reckon overall sentiment may have turned cautious, though we anticipate some bargain hunting to resurface, albeit tentatively. As such, we see the index possibly hovering within the 1,605-1,615 range today," it said in a note Monday.
Meanwhile MIDF noted the softer market was due to lower-than-expected economic data from the US.
“Fears of US recession suddenly resurfaced again as last week saw US Dow Jones, Nasdaq and S&P 500 fall on (a) weekly basis by -2.1% week-on-week (w-o-w), -3.4% w-o-w and -2.1% w-o-w. The market shift was due to a softer than expected increase in US non-farm payroll (NFP) in July-24,” said MIDF Investment Bank in a note.
“While the NFP was below market expectations, we must note that it was still above 100,000, which empirically denotes that the labour market is still somewhat in a healthy state”.
Going forward, MIDF said it foresees the global equity market remaining generally sanguine, principally due to expected monetary easing with the onset of US Fed interest rate cuts and resilient earnings growth.
On top of that, the prospect of a stronger ringgit vis-à-vis the US dollar is likely to attract a return inflow of foreign funds, a necessary fillip to the local equity market.
“In view of the positive monetary (liquidity) and fundamental prospects, we maintain our FBM KLCI baseline target for 2024 at 1,750 points or PER (price-earnings ratio) 2024 of 15.6x, FBM Hijrah baseline target for 2024 at 14,100 points or PER 2024 of 22.5x, and FBM70 baseline target for 2024 at 18,900 points or PER 2024 of 18.8x,” said MIDF.
“On the flip side, we advise investors to tread cautiously and be wary of the lingering risk of US recession as signalled by several empirically potent indicators, as well as the unsettling situation in Ukraine and Palestine which could escalate rather unexpectedly,” the research firm added.