KLCI falls, led by Maybank as Malaysian bonds face downgrade risk

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KUALA LUMPUR (April 17): The FBM KLCI closed down 8.56 points or 0.53% today at 1,620.9 after the ringgit weakened further on expectation global index provider FTSE Russell may downgrade Malaysian bonds.

At 5pm, the KLCI settled lower at 1,620.9, led by Malayan Banking Bhd (Maybank) and Tenaga Nasional Bhd's share drop. Maybank and Tenaga were the top and second-largest percentage decliners respectively among the 30 KLCI stocks.

Maybank closed down 21 sen or 2.28% at RM9 while Tenaga fell 24 sen or 1.95% to RM12.06. In currency markets, the ringgit depreciated to its weakest level today against the US dollar at 4.1455 from 4.1325 yesterday.

Today, Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the KLCI's selling was worsened by the weakening ringgit as volume across Bursa Malaysia reached 3.1 billion shares worth RM1.85 billion.

A total of 572 counters fell across Bursa Malaysia compared to 226 that recorded gains. “Volume traded was quite high at 3.1 billion shares, although most actively-traded stocks are down,” he told theedgemarkets.com.

On Monday, FTSE Russell said in a statement that following the publication of the results of its first fixed income country classification review, it published its full watch list of fixed income markets that will be reviewed for potential changes to their market accessibility levels. FTSE Russell said the watch list comprises Malaysia and China.

"Malaysia — currently assigned a '2' and included to the WGBI (FTSE World Government Bond Index) since 2004, is being considered for a potential downgrade to '1' which would render Malaysia ineligible for inclusion in the WGBI. Onshore China — currently assigned a '1', is being considered for a potential upgrade to a market accessibility level of '2' which is the required minimum for inclusion in the WGBI.

"FTSE Russell will continue to engage with local regulators and market participants in Malaysia and China to assess the potential changes to a country’s classification. It is important to note that inclusion on our watch list is not a guarantee of future action. These markets will be reassessed against the WGBI eligibility criteria at the September 2019 review. Any WGBI inclusion or exclusion changes resulting from the review, and the timetable for their implementation, will be announced shortly thereafter," FTSE Russell said.