KLCI down 1.6%, ringgit weakens after China devalues currency



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KUALA LUMPUR (Aug 12): The FBM KLCI fell 26.78 points as the ringgit weakened above 4.0000 versus the US dollar on continued foreign selling after China devalued its currency. China's move had routed Asian share markets and currencies.

At 5pm, the KLCI settled at 1,609.93 points. Across the region, Japan’s Nikkei 225 was down 1.58%, Hong Kong’s Hang Seng fell 2.38% while South Korea’s Kospi closed 0.56% lower.

In Malaysia, analysts said market sentiment was less optimistic.

“Things are looking pretty bad. The KLCI broke its crucial support, as the index has been trading above this level for the past two years.

"Sentiment is very bearish at the moment and we’re expecting the index to test the 1,600 support level,” Jupiter Securities Sdn Bhd chief market strategist Benny Lee told theedgemarkets.com.

Lee said if the KLCI breaks below the 1,600 support, the following support level would be around 1,540.

It is interesting to note that KLCI futures for August 2015 traded lower today at between 1,595 and 1,624.50 points today.

Malaysian shares had tracked the weaker ringgit. According to Bloomberg, the ringgit weakened to 4.0275 against the US dollar, and 2.8554 per Singapore dollar.

For now, it is still uncertain how much the ringgit will weaken further against world currencies as prospect of US interest rate hikes this year led to demand for US dollar-denominated assets.

China's move to devalue its currency may also prompt Asian central banks to do the same to ensure export competitiveness.

Reuters reported that Asian stocks and emerging market currencies tumbled on Wednesday and commodities fell after China let the yuan fall sharply for a second straight day, forcing investors to seek refuge in safe-haven government debt.

In Malaysia, Lee said, "There is still no support seen for the currency (ringgit) as it continues to decline on a daily basis against the greenback."

"But there should be some technical support at the 4.0500 level," he said.

Bursa Malaysia saw 2.48 billion shares worth RM2.29 billion traded. Decliners outnumbered gainers at 973 versus 96.

Leading the decliners list were Dutch Lady Milk Industries Bhd and Hong Leong Financial Group Bhd, while British American Tobacco (M) Bhd led gainers.

The top-active counter was KLCI put warrant FBMKLCI-HK as investors bought index-linked warrants to hedge against broader market losses.