This article first appeared in The Edge Financial Daily on November 28, 2018
KUALA LUMPUR: Market watchers, who had a glimmer of hope when the FBM KLCI crossed the 1,700 mark on Monday, had their optimism shattered as the benchmark index fell 1%, or 17.02 points, to 1,684.97 yesterday.
Two constituents of the FBM KLCI, Genting Bhd and its 49.45%-owned subsidiary, Genting Malaysia Bhd, were mainly behind the index’s decline. Genting Malaysia fell 60 sen, or 16.67%, to RM3 while Genting Bhd declined 52 sen, or 7.54%, to RM6.38.
Genting Malaysia was the day’s top decliner, in percentage terms, among the top 30 FBM KLCI stocks followed by Genting.
The selldown in the Genting counters is attributed to the legal proceedings filed by Genting Malaysia in the US against Fox Entertainment Group LLC, Twentieth Century Fox Film Corp, FoxNext LLC (collectively referred to as FOX) and The Walt Disney Co, for terminating an agreement for a Fox World theme park in Genting.
The fall in the prices also came in the wake of a downtrend in the US and European markets after US President Donald Trump said he may raise tariffs again on Chinese imports, just days before meeting with China’s President Xi Jinping.
Inter-Pacific Securities head of research Pong Teng Siew agreed that market sentiments were already fragile before the Genting announcement.
“Investors are basically looking for any excuse to sell, and they got one yesterday. There was no attempt at bargain hunting at all; it was just selling throughout the day and at higher-than-usual volumes, not just on the Genting counters but other blue-chips as well.
“At this point, we do not know if foreign funds were the sellers of both the Genting stocks, but if they are it would go against the trend as foreigners have been mostly buyers last week,” he told The Edge Financial Daily.
Rakuten Trade head of research Kenny Yee said although the Genting selldown was one of the causes for the FBM KLCI’s decline, the weaker regional markets had also impacted the index’s performance.
“Most of the regional markets were down, so we think it is more of a broader market scenario, and not just the Genting counters’ decline.
“Definitely, sentiments are fragile among investors, as they are becoming more risk-averse, and are more sensitive to this kind of news. Investors are also [wary] of the current market’s volatility. For example, yesterday the Dow Jones closed up over 300 points but this positivity did not flow into this region,” he said.
Etiqa Insurance and Takaful chief strategy officer Chris Eng, however, does not believe the Malaysian stock market is easily spooked. Rather, he viewed yesterday’s fall boiled down to company-specific issues from two of the FBM KLCI constituents.
“I don’t think our market is fragile or easily spooked. Genting and Genting Malaysia are constituents of the index and their fall dragged the market down. In particular, these are very company-specific issues that affected the market,” he said.
Other decliners yesterday included Telekom Malaysia Bhd, dropping seven sen, or 3.02%, after an impairment loss dragged the utility company into its first quarterly loss in 10 years of RM175.59 million.
Other top decliners were Nestle (M) Bhd, British American Tobacco (M) Bhd and Petronas Dagangan Bhd. Notably, other indices were also in the red yesterday, such as the FBM Small Cap Index (down 1.94%) and the FBM ACE Index (down 1.59%).
Pong said a decline in commodity prices also contributed to the weak market sentiment. “It doesn’t help that oil prices are currently at weak levels and so are other commodities such as crude palm oil. They are not helping most of the listed companies.
“There is a rather negative mood in the market, not just among retail investors but institutions as well. Given the positive performance from the market on Monday, I thought that probably year-end window-dressing activities have started. But judging by the market’s performance on Tuesday (yesterday), this is not the case.”