KLCI down 2.69% as Malaysia stocks enter into bear market

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KUALA LUMPUR (Feb 24): The FBM KLCI closed down 41.14 points or 2.69% at 1,490.06 today, after a sea of red washed over Malaysian stocks amid an unusual confluence of factors including the Covid-19 global outbreak, lower crude oil prices and Malaysia’s political uncertainty. 

A local fund manager, who spoke on condition of anonymity, told theedgemarkets.com that the Malaysian stock market has entered into a bear market as investors adopted a "sell-first, think-later" approach, while waiting for political clarity.

The local fund manager said: “If you look at the grand scheme of things, the Malaysian market is certainly bearish at this point, based on the accepted ratio where stocks see a 20% decline from its recent peak.

“It may rebound but everything will depend on the political temperature, which appears to be very fluid at this point, as more events unfold. If there are no developments to the political impasse, markets could fall further. The immediate support level would be 1,480.”

Investors are closely watching Malaysia's political landscape after unexpected talks yesterday (Sunday, Feb 23) between Tun Dr Mahathir Mohamad's Parti Pribumi Bersatu Malaysia and opposition parties to form a new government, which would exclude PKR president Datuk Seri Anwar Ibrahim.

Today, news reports quoting the Prime Minister's Office's statement said Dr Mahathir had submitted his resignation letter as prime minister to the Yang di-Pertuan Agong at 1pm.

Across Bursa today, decliners outstripped gainers by 1,015 to 137 respectively. Trading volume swelled to 4.03 billion shares worth RM3.91 billion today, versus 2.73 billion shares worth RM2.14 billion on Friday (Feb 21).

Top decliners included KLCI stocks Kuala Lumpur Kepong Bhd, Public Bank Bhd and Tenaga Nasional Bhd, after broad-based selling across Bursa.

All Bursa indices ended lower. The construction and energy indices were dealt the largest blow, after they fell 6.07% and 4.06% respectively, as the Covid-19 global outbreak and lower crude oil prices hit world market sentiment.

Reuters reported global shares and oil slid on Monday, while safe-haven gold surged as the spread of the 2019 novel coronavirus (Covid-19) outside China, darkened the outlook for world growth, with infections and deaths rising in South Korea, Italy and the Middle East.

The large spike in Italian cases has especially rattled investors on concerns about the potential for the virus to spread deeper into Europe, and cause economic disruption there.

The selloff in Asian markets and US and European stock futures on Monday was financial markets' first reaction to the weekend news, which analysts described as game-changing developments in the outbreak.

(story updated)