KLCI falls, ringgit weakens amid FTSE Russell downgrade concerns

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KUALA LUMPUR (April 16): The FBM KLCI closed down 1.87 points or 0.11% today after the ringgit depreciated to its weakest intraday level against the US dollar at 4.1330 amid concerns global index provider FTSE Russell may downgrade Malaysian bonds.

The ringgit also took cue from lower Brent oil prices at about US$71 a barrel after a Russian Minister was quoted as saying the country and OPEC may boost crude oil output to fight the US for market share.

At 5pm, the KLCI settled at 1,629.46 after erasing gains from its intraday high at 1,635.47. In currency markets, the ringgit weakened substantially today to 4.1330 against the US dollar from 4.1085 on Monday.

“So really, it is a conspiracy of the bears for ringgit at this moment,” Bloomberg quoted Vishnu Varathan, head of economics and strategy at Mizuho as saying today in Singapore.

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.

Across Bursa Malaysia today, 2.49 billion shares worth RM1.79 billion were traded. Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said the domestic stock market is currently going through “a spell of rather low liquidity”.

“We have had a brief run in construction stocks earlier — because of news on the East Coast Rail Link (ECRL) — but that has fizzled. The low liquidity cannot sustain the gains, and is likely to stay until we see a change in the domestic liquidity especially among institutional [investors],” Pong told theedgemarkets.com.