KLCI down, small caps up after BNM rate decision, ahead of US presidential election

KLCI down, small caps up after BNM rate decision, ahead of US presidential election
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KUALA LUMPUR (Nov 3): The FBM KLCI closed down 5.01 points or 0.34% at 1,461.45 today while Bursa Malaysia’s index for small market capitalisation (small cap) stocks rose 2.21% as investors weighed Bank Negara Malaysia’s (BNM) decision to maintain interest rates during an event-heavy week, which will see markets bracing for Malaysia’s Budget 2021 announcement besides the US presidential election.

It was reported that BNM decided to maintain the Overnight Policy Rate at 1.75% today as Malaysia’s economic activity is projected to improve further and as the central bank expects the nation’s underlying inflation to remain subdued as the world economy contends with the resurgence in Covid-19 cases.

Investors will also closely watch the US presidential election today as they anticipate Malaysia’s Budget 2021 announcement on Friday (Nov 6).

Today, Rakuten Trade Sdn Bhd research vice president Vincent Lau said "investors are still staying on the sidelines, as they turned cautious" ahead of the US presidential election today (Nov 3), as well as Malaysia’s Budget 2021 announcement on Friday.

CGS-CIMB Securities Sdn Bhd economists Michelle Chia and Lim Yee Ping wrote in a note today that BNM’s decision was against CGS-CIMB's expectations, "implying BNM’s inclination to look past near-term risks to economic recovery, drawing a line on further rate cuts."

"Market attention next shifts to Budget 2021 on 6 Nov, which is expected to provide the next leg of stimulus for economic recovery,” Chia and Lim said.

Today, Bursa saw 6.45 billion securities worth RM3.31 billion traded across the exchange. Gainers outpaced decliners at 669 to 384 respectively.

At a glance, notable decliners included KLCI constituents PPB Group Bhd and Sime Darby Bhd.

PPB’s share price closed down 14 sen or 0.76% at RM18.36, while Sime Darby Bhd ended 13 sen or 5.24% lower at RM2.35.

Globally, it was reported that world share markets rose as investors predict the outcome of the closely-watched US presidential election.

Meanwhile, President Donald Trump and Democratic rival Joe Biden made a last-ditch push for votes in battleground states, as their campaigns prepared for post-election disputes that could prolong a divisive presidential election.

European stock markets rose in early trading on Tuesday, as investors bet on a clear win for Biden as the United States votes-in its most polarised presidential election in living memory. 

Asian shares got off to a strong start on Tuesday, with investors buoyed by strong factory output data from major economies, while the dollar and gold held ground on political uncertainty ahead of the US elections.

"Markets are pricing for a Biden win, certainly a clear outcome, and they want a clear and uncontested outcome," Michael Hewson, chief market analyst at CMC Markets, was quoted by Reuters as saying.

A shock Trump win, a contested result or just a divided outcome could all trigger corrections in markets, Hewson said.

Chong Jin Hun