KUALA LUMPUR: Bursa Malaysia’s benchmark index drops to its nine-year low at opening yesterday, fuelled by the country’s political uncertainties and external challenges.
At 9.05 am yesterday, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell 22.83 points or 1.54 per cent to 1,459.81 from last Friday’s close, before settling at 1,466.94 points.
It was 1.1 per cent lower than Friday’s closing of 1,482.64 points.
This was the lowest level last seen since November 29, 2011, when the index closed at 1,444.72.
At 10.12am, its benchmark the Bursa Malaysia KLCI (FBM KLCI) fell as much as 1.8 per cent to 1,456.08.
CGS-CIMB said the Malaysian equity market was expected to stay volatile due to short-term policy uncertainties following the unexpected change in federal government and potentially several state governments.
It said it was also unclear if the latest development would lead to changes in government-linked companies’ leadership and policies introduced by the previous Pakatan Harapan (PH) government.
It was also unclear if PH would be able to bring up a vote of no confidence to test the extent of the support for the new Prime Minister Tan Sri Muhyiddin Yassin when Parliament reconvenes on March 9.
“In view of these concerns, coupled with uncertainty caused by Covid-19, earnings risks, sharp drops in global markets over the past week and foreign selling, there could be near-term downside risks to FBM KLCI,” it said.
CGS-CIMB recommended investors to stay defensive and go for export-oriented sectors, such as agriculture, gloves, technology and electronics manufacturing services, oil and gas, healthcare and utilities sectors, which are the least affected by the change in government.
It said sectors affected by domestic policies included banking, consumer, construction and property.
Stocks with high foreign shareholding may also be subject to selling pressure due to uncertainty, it said.
Meanwhile, the ringgit closed 0.2 per cent higher on Monday to 4.20 against US dollar from 4.21 on Friday.
Putra Business School business development manager associate professor Dr Ahmed Razman Abdul Latiff said the confidence among investors and industry players can be greatly improved if the power transition was done smoothly.
It also depends on whether there is a quick assurance from the government of the day that the existing policies and plans that are business-friendly would continue and government commitment to improving the economy is renewed.
“Such assurance is needed as investors are looking for long term sustainability. A weak ringgit will make it cheaper for the investors to invest here and also for foreign business to import our products but continuous weakening will affect the abilities of investors to realise their investment.
“At the same time, a weak ringgit will cause imports to be expensive and can cause higher cost of living and some exports will be affected with higher cost due to its direct components sourced from overseas suppliers,” he added.