KLCI slips on profit-taking, banking stocks hold tight despite OPR cut to 16-year low

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KUALA LUMPUR (July 7): The FBM KLCI reversed earlier gains to close 10.18 points or 0.65% lower at 1,566.72 as investors chose to take profit after six consecutive days of gains, while mixed performance at regional markets also weighed down the benchmark index. 

Commenting on the market performance, MIDF Research senior analyst Imran Yassin Md Yusof told theedgemarkets.com that profit-taking activities appeared to be the main reason dragging down the key index today. 

“Having said that, glove makers continued to perform stronger today as Covid-19 cases escalated around the world. Hence, it is expected the glove makers will continue to perform well,” Imran added. 

Meanwhile, on the Overnight Policy Rate (OPR) cut front, Imran said the move by Bank Negara Malaysia (BNM) was largely expected, and he expected the cut will have minimal impact on the bank earnings from downward pressure in terms of net interest margin compression. 

He added that competition among banks for fixed deposit rate is not as intense, which helped to cushion the impact from lower OPR. Hence, banking stocks' prices were largely stable today. 

The central bank today reduced the OPR by another 25 basis points (bps) to 1.75%, a record low since the floor was set in 2004.

Including today’s OPR cut, BNM has slashed the OPR four times so far this year for a cumulative 125bps reduction.

Among the indices, the FBM ACE led the gain by increasing 2.75% to 7,246.90 from 7,132.23 recorded yesterday. 

It was followed by the healthcare index, which includes rubber glove manufacturers. The index closed up 1.90% at 2,767.79 points today compared to 2,769.84 points previously. 

Bursa Malaysia's financial services index also expanded 0.14% to close at 13,225.59, from 13,219.04 yesterday. 

Nonetheless, the wider market breadth was negative, with 615 losers versus 389 gainers, while 487 counters traded unchanged. Some 7.78 billion shares valued at RM4.93 billion were traded.

Among the 30 constituents of the KLCI, Petronas Chemicals Group Bhd (down 4.47% or 31 sen to close at RM6.63 today) led the losers, followed by Hap Seng Consolidated Bhd (down 4.05% or 36 sen at RM8.52) and Digi.com Bhd (down 3% or 13 sen at RM4.21).

Across Asia, Japan's Nikkei 225 dipped 0.44% and South Korea's Kospi sank 1.09%. 

In China, the Hong Kong Hang Seng Index shed 1.38% while the Shanghai Stock Exchange Composite Index inched up 0.37%.

Reuters reported that the Chinese share market extended its positive run on Tuesday, in line with the mainland government’s push for a stronger market, while the rest of the region turned cautious on equities.

“MSCI’s broadest index of Asia-Pacific shares outside Japan see-sawed during the local session and was down 0.2%, after it briefly traded in positive territory.

The negative performance on Tuesday came after the index rose 7%, which took it to a 4½-month high in the past five trading sessions.

It also reported that oil prices were mixed in line with some of the Asian equities markets.

At the time of writing, Brent crude oil fell 1.32% to US$42.53 per barrel, while the West Texas Intermediate also slipped 1.48% to US$40.03 per barrel.