FBM KLCI extends losses as Asian stocks tank amid higher US treasury yields

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KUALA LUMPUR (April 25): The FBM KLCI fell 13.41 points or 0.7% with Asian stock markets today following US equities' sharp overnight drop. Global shares declined as US government bond or treasury yields rose above 3%.

In Malaysia, Hong Leong Investment Bank Bhd head of retail research Loui Low told theedgemarkets.com that the KLCI's downtrend continued as investors were cautious about the impact from rising US government bond or yields which could trigger a selloff in risky assets such as stocks.

Reuters reported that creeping gains in US treasury yields are fuelling fears that portfolio managers may move money into safer fixed-income securities at the expense of riskier assets like stocks and emerging markets. The 10-year yield, a benchmark for global borrowing costs, has been driven steadily higher by a combination of concerns over inflation, growing debt supply, and rising Federal Reserve borrowing costs.

It was reported that the 10-year US Treasuries yield rose to as high as 3.009 percent. A break of its January 2014 high of 3.041 percent could turn investors even more bearish.

At Bursa Malaysia today, the KLCI closed at 1,851.93 at 5pm while the small-cap index dropped 127.57 points or 0.88% to 14,440.98. Yesterday, the KLCI fell 15.02 points.

Low said: “The KLCI is trading near its support level of 1,850 currently and I think we should see some recovery back to 1,860. However, selling pressure would quickly come in at 1,860 to 1,865 level. If the index falls further, the next support level would be at the 1,835 level."

Across Asian stock markets, Japan’s Nikkei 225 fell 0.28% while South Korea's Kospi dropped 0.62%. In China, Hong Kong’s Hang Seng lost 1.01% while the Shanghai Stock Exchange Composite was 0.35% lower.