This article first appeared in The Edge Financial Daily on March 8, 2018

KUALA LUMPUR: Events in the US continue to take centre stage in stock markets worldwide, with the latest controversy involving US President Donald Trump’s top economic adviser causing major markets to plunge yesterday.

Global stocks fell following reports that Trump’s chief economic adviser Gary Cohn had resigned after a dispute with the president over the latter’s controversial plan to impose stiff tariffs on steel and aluminium imports.

During early US trade, the Dow Jones Industrial Average was down 0.94%; the S&P 500 fell 0.69% and the Nasdaq Composite declined 0.59%.

Malaysia’s stock market was not spared, with all indices closing in the red. The FBM KLCI closed at 1,837.90 points yesterday, down 10.47 points or 0.57% — one of its worst performances year to date, with six other trading days recording a bigger decline. Its worst one-day performance was on Feb 6 when the benchmark index fell 2.2%.

Bursa Malaysia Technology Index led the biggest percentage loss yesterday, closing 1.2 points or 3.26% to 35.60, followed by the FBM Ace Index losing 178.34 points or 2.95% to 5,865.04.

The construction index ended the day down 7.2 points or 2.42% to 289.79. Small-cap stocks, as reflected in the FBM Small Cap Index, fell 378.53 points or 2.34% to 15,787.32.

Market breadth, which indicates the market’s overall health, was negative as decliners thumped gainers by 991 to 163, while 297 counters traded unchanged.

“The poor market sentiment was caused by Cohn’s resignation. His announcement resulted in renewed fears that a trade war would eventually materialise given that the remaining advisers to the White House are mostly anti-trade,” RHB Research Institute Sdn Bhd director and head of Malaysia Research Alexander Chia told The Edge Financial Daily.

The Malaysian stock market saw RM34 billion wiped off in the past three days, as Trump’s trade threats continue to rattle world stock markets.

On Monday, World Trade Organization director general Roberto Azevedo reportedly told member states that they must stop “the fall of the first dominoes” in a trade war that would be hard to reverse and could trigger a deep recession.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said Cohn’s resignation would directly explain the negative market breath across the region yesterday.

“The market has been down all day. All of Asia’s stocks fell mainly due to news of Trump’s adviser’s resignation. There was some hope that Trump’s tariff plans would not be true, but then news on this (the resignation) has further shaken up the market,” he told The Edge Financial Daily.

He expects the FBM KLCI to end lower at the end of the week as markets remain volatile.

Investors continued to dump Hengyuan Refining Co Bhd shares yesterday, falling for the sixth straight day to close RM1 or 9.82% lower at RM9.18, with a market capitalisation of RM2.75 billion. A total of 16.41 million shares changed hands.

The crude oil refiner’s share price has declined 43.7% since the start of the year, wiping out RM2.14 billion in market value.

Likewise, its peers such as Petron Malaysia Refining and Marketing Bhd and Sapura Energy Bhd saw their share prices fall yesterday. Petron closed 70 sen or 7.19% lower at RM9.03, while Sapura Energy was down 4.5 sen or 8.11% at 51 sen.

Other notable decliners were AirAsia Bhd, down 24 sen or 5.71% to RM3.96, and technology stocks such as Malaysian Pacific Industries Bhd and Vitrox Corp Bhd, down 23 sen or 2.63% to RM8.50 and 17 sen or 2.75% to RM6.02 respectively.

Most steel and metal companies’ stocks fell yesterday as well, as investors believe Cohn’s departure signals the Trump administration is absolutely moving forward with import tariffs of 25% on steel and 10% on aluminium.

Press Metal Aluminium Holdings Bhd lost 23 sen or 4.44% to RM4.95, while Aluminium Co of Malaysia Bhd slipped 1.5 sen or 1.92% to 76.5 sen. Malaysia Steel Works (KL) Bhd sank 10 sen or 9.62% to 94 sen.

Other affected stocks included Mycron Steel Bhd, dipping 2.5 sen or 5.32% at 44.5 sen, and Southern Steel Bhd down seven sen or 3.43% at RM1.97.

Ann Joo Resources Bhd, however, defied the trend, ending the day one sen or 0.29% higher at RM3.48.

Nevertheless, Chia said it is not a good time yet to accumulate these stocks. “There is no rush to pile back into the market as the stocks are not a screaming bargain. Clearly, the majority of investors are adopting a wait-and-see stance due to the impending [14th general] election.”

Elsewhere, Hong Kong shares followed world markets lower yesterday, with the Hang Seng index down 1%. Japan’s Nikkei 225 dropped 0.77%, while South Korea’s Kospi declined 0.4%.