KUALA LUMPUR (March 12): Malaysian stocks extended their sharp decline on Wednesday, and the country’s benchmark index suffered its worst day in seven months. The ringgit also depreciated.
Investors, grappling with uncertainties surrounding US trade policies, are now weighing the potential economic damage to the US and its major trading partners from the tariff war. The worries have also sparked fears that the world’s largest economy may tip into a recession, weighing on markets.
“Today’s market reaction reflects genuine macroeconomic concerns,” though there may be some overreaction, said UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan.
The FBM KLCI began falling from the opening bell, down as much as 41 points or nearly 3%. The index ended off lows, but still down over 2% at 1,484.83 on its fourth consecutive day of decline. Wednesday also marked the KLCI’s steepest drop in a single-day since August 2024.
CIMB Group Holdings Bhd (KL:CIMB), which has the third-biggest market capitalisation on Bursa Malaysia, fell 3.6% to RM7, amid a broad decline among banks and other sectors most sensitive to economic conditions.
All but one sector were in the red, led by the Bursa Malaysia Construction Index as Gamuda Bhd (KL:GAMUDA) fell 7.1% to RM3.77. The transportation-and-logistics index managed to eke out tiny gains.
Most other markets in Asia were also in negative territory, though the KLCI was the worst-performing index. Stocks in Japan, Singapore, Taiwan, and South Korea however advanced. Major currencies in the region also weakened against the US dollar.
Investors will now be closely watching the release of the US February consumer price index data due later on Wednesday amid growing recession concerns. If US inflation comes in hotter than expected, the Federal Reserve (Fed) could be forced to delay rate cuts, analysts said.
“The higher the inflation, the less likely the Fed will cut the rates, unless the market sell-off gets ugly to an extent to threaten financial stability,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
That could put more pressure on emerging market equities, including Malaysia, as investors reassess risk appetite and capital flows, said Mohd Sedek, who is also an economist.