KUALA LUMPUR (March 19): Malaysian shares fell on Wednesday as investors returned from holiday with caution following overnight losses on Wall Street and sharp declines in regional markets.

The country’s benchmark equity index FBM KLCI fell as much as 15.6 points or 1% to 1,512.21 during the morning trading session, as sentiment weakened following Tuesday’s heavy selling in Indonesia. 

Recall, on Tuesday, Indonesia’s benchmark index Jakarta Composite Index fell as much as 7% to September 2021 lows, trigerring an automatic suspension of trading on the exchange. Bursa Malaysia was closed on Tuesday due to public holiday.

The FBM KLCI index rebounded slightly to close at 1,517.66 points, down 10.15 points or 0.66% on Wednesday, reversing its three days winning streak. The index was dragged by consumer products, banking and construction stocks. 

Among the top losers were Nestle (M) Bhd (KL:NESTLE), CIMB Group Holdings Bhd (KL:CIMB) and IJM Corp Bhd (KL:IJM)

CIMB, the country’s second-largest lender by assets, fell 31 sen or more than 4% to RM6.94 to lead decline among constituents in the 30-stock index. Meanwhile, its Indonesia unit CIMB Niaga Tbk fell 2% on Tuesday amid a sharp selloff in the Indonesia stock market.

“Given that CIMB Niaga contributes around 25% to CIMB Group’s earnings, the weakness in Indonesia likely weighed on sentiment,” Khoo Zing Sheng, a fund manager at Pheim Asset Management, told The Edge.

He expected investors to remain wary, keeping the KLCI rangebound in the near term amid lack of catalysts in the local market and continued weak sentiment in the US.

Whipsawed by the erratic US trade policies, investors have been 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.

Investors are now awaiting the US Federal Reserve’s monetary policy decision later in the day.

“The KLCI will recover,” said Rakuten Trade Sdn Bhd head of research Kenny Yee. “Currently, it's more like a knee-jerk reaction by the foreign selling on the Asean region to participate in Hong Kong.”

Meanwhile, Kenanga Investment Bank said Malaysia is "relatively" less exposed to potential trade disruptions as its reliance on the US as an export market, at 13% of total exports, is significantly lower than Vietnam’s 30%.

“In fact, on a fundamental basis, we see silver linings for Malaysia due to resilient economic growth with a stable interest rate” among other reasons, Kenanga said in a note on Wednesday.