KLCI pares much of gains, stays up 0.44% on murky outlook for construction sector

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KUALA LUMPUR (May 31): The FBM KLCI pared much of its gains at midday break today and was up 0.44% as analysts cautioned there could be further shelving of mega-construction jobs.

The RM40 billion third mass rapid transit project (MRT3) is “dead in its track” and the downturn in rail contracts has been set in motion, with up to RM100.1 billion worth of rail contracts vanishing, with effects to be felt from contractors to building material providers, according to analysts at CIMB Investment Bank Bhd.

“We believe any upcoming big-ticket rail projects are now at risk of deferment, renegotiation or outright cancellation. These include the Gemas-Johor Bahru electrified double tracking (EDT) project and the East Coast Rail Link (ECRL),” CIMB analysts Sharizan Rosely and Kamarul Anwar said in a sector note today.

At 12.30pm, the FBM KLCI was up 7.68 points to 1,726.96. The index had earlier soared to its intra-morning high of 1,754.44.

Gainers led losers by 299 to 272, while 583 counters traded unchanged. Volume was 1.64 billion shares valued at RM1.57 billion.

The top gainers included Fraser & Neave Holdings Bhd, Allianz Malaysia Bhd, Hengyuan Refining Company Bhd, Petronas Gas Bhd, Hong Leong Bank Bhd, Tenaga Nasional Bhd, Nestle (M) Bhd, MISC Bhd, Malaysia Airports Holdings Bhd and Hong Leong Financial Group Bhd.

The actives included My E.G. Services Bhd, Sapura Energy Bhd, Borneo Oil Bhd, NWP Holdings Bhd, Sino Hua-An International Bhd, Malaysian Resources Corp Bhd, Nexgram Holdings Bhd and Hibiscus Petroleum Bhd.

The losers included Carlsberg Brewery Malaysia Bhd, Ajinomoto (M) Bhd, United Plantations Bhd, IJM Corp Bhd, Kossan Rubber Industries Bhd, Ayer Holdings Bhd, Gas Malaysia Bhd and Scientex Bhd.

Asian stocks rebounded from a two-month trough on Thursday, while the euro enjoyed a respite after sinking to its lowest in 10 months as political turmoil in Italy that had roiled global financial markets, showed signs of easing, according to Reuters.

MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.56%, after slumping to its weakest since the start of April on Wednesday, Reuters said.

Kenanga IB Research said in a note today that Asian equities were down on Wednesday, while euro was stuck around 10-month lows, as investors fear new elections could bring further uncertainty to Italy.

On the local front, the research house said the FBM KLCI plunged by 56.6 points (3.18%) to close lower at 1719.28, in tandem with the weak broader market sentiment, with 995 bears outnumbering 148 bulls, while 293 counters traded unchanged.

Yesterday’s move marked the index decisively breaking below the 1,750 level to suggest the downside-bias trade is likely to persist at least in the near-term, Kenanga IB added.

“With negative displays in momentum indicators continuing, expect FBM KLCI to be southward trending towards lower supports at 1,700 (S1), with a break below deemed highly negative. Should (S1) fail to sustain, expect 1,690 (S2) to hold its place.

“Resistance levels can be found at 1,780 (R1) and 1,800 (R2),” the research house added.