KLCI pares losses as ringgit weakens

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KUALA LUMPUR (August 10): The FBM KLCI pared losses while the ringgit weakened as investors eyed prospects of Malaysia's slower economic growth and political uncertainties.

At 3.31pm, the KLCI fell 29.65 points to 1,653 points, dragged down by shares like Tenaga Nasional Bhd and SapuraKencana Petroleum Bhd.

Bursa Malaysia saw 1.46 billion shares worth RM1.29 billion exchanged. Decliners overpowered gainers at 936 against 65.

Top decliners included Dutch Lady Milk Industries Bhd and Tenaga while gainers were led by FBM KLCI put warrants.

The KLCI pared losses after falling 31.19 points or 1.85% to 1,651.46 points at 3pm amid concerns on Malaysia's political backdrop following the recent Cabinet reshuffle.

Such political sentiment and other global factors have not augured well for the ringgit.

According to Bloomberg, the ringgit weakened to 3.9345 against the US dollar amid lower crude oil prices and anticipation of US interest rate hikes this year.

Reuters reported that oil prices kept sliding on the global slowdown, a US gasoline glut and a rise in the US oil rig count. Crude futures prices fell to fresh multi-month lows early on Monday. Brent fell to US$48.35 per barrel, not far from a six-year low of US$45.19 hit in January.

The ringgit's strength correlates with crude oil prices as the commodity is a major component of Malaysia's economy. Anticipation of US interest rate hikes this year has resulted in higher demand for US dollar-denominated assets.

Today, analysts said Malaysia's second quarter gross domestic product's (GDP) year-on-year
(y-o-y) growth could have slowed.

The GDP numbers will be announced this Thursday (Aug 13).

"Locally, investors will be on the lookout for Malaysia's 2Q15 GDP data this Thursday. Consensus expectations are pointing towards a narrower growth of 4.5% y-o-y versus 5.6% y-o-y in the first quarter, affected by the impact from GST implementation and weaker demand in key exports sectors like E&E and oil and gas.

"The outlook remains murky, with private consumption affected by the GST implementation, weak prospects for exports on the back of low commodity prices and slowdown in key exports markets, and cooling sales in domestic property sector affecting construction activities. The hope is for the weak ringgit to translate into greater external demand and for the impending mega infrastructure projects implemented without delays," TA Securities Holdings Bhd wrote in a note today.