KLCI trails palm oil plantation index drop as US bans FGV products

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KUALA LUMPUR (Oct 1): The FBM KLCI finished 8.05 points or 0.53% lower today at 1,496.77 while Bursa Malaysia's Palm Oil Plantation index fell by a larger quantum as investors weighed a confluence of factors including the US Customs and Border Protection's detention order on palm oil produced by FGV Holdings Bhd.

Analysts and remisiers said today the confluence of factors weighing on investor sentiment includes the resurgence of global COVID-19 infections besides the end of Malaysia's loan-repayment moratorium.

"While stocks should stay range bound amid virus resurgence worries, which would prop up rubber glove and healthcare related sectors, trading liquidity should dwindle with retailers continuing to consolidate their trading positions," TA Securities Holdings Bhd analysts wrote in a note today.

Maybank Investment Bank Bhd remisier Jeffry Aziz told theedgemarkets.com today that the end of Malaysia's six-month loan-repayment moratorium yesterday (Sept 30) had resulted in lower retail participation in the stock market today.

Bank Negara Malaysia had in March 2020 announced the six-month loan-repayment moratorium starting April 1, 2020 to help individuals and businesses affected by the COVID-19 pandemic, which had led the Malaysian Government to implement the Movement Control Order (MCO) to curb the spread of the pandemic.

The loan-repayment moratorium is believed to have led to higher retail participation in the stock market in recent months as borrowers, who obtained a respite from debt repayments, had instead invested their money in equities.

Today, Jeffry said global political uncertainties including the US presidential election, are also dictating investor sentiment.
 
“Another factor that contributed to the performance of the KLCI today is political uncertainty that continues to be present. This is in addition to the possibility of a future (global) lockdown given the rise in COVID-19 cases,” he said.

At Bursa today, the KLCI's 0.53% drop trailed the Palm Oil Plantation index's 2.91% decline as investors sold shares of oil palm-related companies including PPB Group Bhd, Sime Darby Plantation Bhd and Genting Plantations Bhd after the US issued a detention order on palm oil produced by FGV.

The detention order has been effective since Wednesday.

In a statement on Wednesday, the US Customs and Border Protection said its Office of Trade directed the issuance of a Withhold Release Order against palm oil and palm oil products made by FGV based on information that reasonably indicates the alleged use of forced labour.

Today, CGS-CIMB Securities Sdn Bhd analysts Ivy Ng Lee Fang and Nagulan Ravi wrote in a note that the US ban on FGV products "may also have some implications for other palm oil players" as the US is also believed to be investigating allegations regarding the broader oil palm industry's labour practices.

Across Bursa today, 4.92 billion securities worth RM2.61 billion were transacted. Top decliners included PPB, Sime Darby Plantation and Genting Plantations.

PPB's share price closed down 30 sen or 1.58% at RM18.70 while Sime Darby Plantation fell 26 sen or 5.15% to RM4.79. FGV dropped 10 sen or 8.7% to RM1.05.

Yesterday, Bursa's trading volume was higher at 5.64 billion securities valued at RM2.64 billion.

Chong Jin Hun