KLCI, Asian markets fall on earlier US rate hike prospect

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KUALA LUMPUR (Sept 10): The FBM KLCI fell 3.27 points or 0.17% in tandem with Asian markets, on the prospect of the US raising interest rates sooner than expected.

The KLCI settled at 1,870.85 points at 5pm, on losses in plantation stocks like PPB Group Bhd and Sime Darby Bhd.

An increase in US interest rates will lead to an outflow of funds from emerging markets such as Malaysia, back into US-based assets.

Reuters reported that Asian shares tumbled on Wednesday, as markets wagered that the Federal Reserve would raise interest rates earlier than expected, sending U.S. bond yields higher and keeping the dollar well bid near 14-month highs, against a basket of major currencies.

Hong Kong’s Hang Seng and South Korea’s Kospi fell 1.93 % and 0.33% respectively.

In Malaysia, fund managers, however, told theedgemalaysia.com that the prospect of higher interest rates in the US, might not be the reason for the KLCI's decline today.

Choo Swee Kee, chief investment officer of TA Investment Management Bhd said concerns of a hike in US interest rates had been circulating the market, and was not likely the stimulus for the decline in the Malaysian exchange today.

“I think that the concern about when the US will increase its interest rate, has been around for a while now. Everyone is anticipating when the Fed will increase rates.

"So, this is not going to affect the market that much,” said Choo.

He said the Malaysian market had been “quiet and directionless” in the past month, and would move only according to global news.

“Last month, we saw a lot of activity among the small cap stocks. But that has quieten down slightly.

"One of the reasons for that is that prices for small cap stocks have gone up considerably and the market is going through a consolidation period,” Choo explained.

Choo said investors were “wary” of the market in the months of September and October, as crises had happened during both months in the past.

One example was the September 11 incident in the US, according to Choo.

Today, Bursa Malaysia saw 2.18 billion shares valued at RM2.01 billion, change hands.

There were 399 gainers and 424 decliners, while 325 counters where unchanged.

Leading gainers included Kuala Lumpur Kepong Bhd, Lafarge Malaysia Bhd and Kossan Rubber Industries Bhd.

Top decliners included British American Tobacco (M) Bhd, Fraser & Neave Holdings Bhd and I-Bhd.

Penny stocks such as Iris Corp Bhd and GPA Holdings Bhd were the most actively-traded stocks.