KCLI slips 9.05pts, ringgit weakens on US rate hike talk

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KUALA LUMPUR (May 24): The FBM KLCI slipped 9.05 points or 0.6% while the ringgit weakened in anticipation of a potential US interest rate hike in the near term.

US interest rate hikes do not bode well for emerging Asian markets as investors shift their funds back to US dollar-based assets. In Malaysia, the KCLI closed at 1,625.84 points at 5pm while the ringgit weakened to 4.1210 against the US dollar.

Reuters reported that Asian shares stumbled to near 2½-month lows on Tuesday and the US dollar pared some of its recent losses as investors worried about the likelihood of an interest rate increase in coming weeks.

A string of comments in recent weeks by Federal Reserve (Fed) officials and minutes of the last Fed meeting have put a possible rate hike firmly on the table for June or July, reviving the dollar but cooling appetite for riskier assets, even if markets are not totally convinced a tightening will come so soon.

In Malaysia, Jupiter Securities Sdn Bhd analyst Benny Lee told theedgemarkets.com that selling activity in the KLCI controlled the market due to an improving US market, which led to interest rate hike expectations.

"More foreign funds are leaving for the US where its market is improving. This could be a result of the anticipation of the US Federal Reserve's rate hike. This has been happening since early this year," Lee said.

Across Bursa Malaysia, share volume was 1.72 billion valued at RM1.78 billion. There were 327 gainers versus 456 decliners.

Top gainer was Hwang Capital (M) Bhd while leading decliner was United Plantations Bhd. Top-active counters included AirAsia X Bhd and XOX Bhd.