KLCI retreats as Malaysia's 1MDB, US rates spur foreign selling

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KUALA LUMPUR (May 27): The FMB KLCI slid 9.02 points or 0.51% as anticipation of earlier than expected US interest rate hike spurred foreign selling of Asian shares. Malaysian shares' weaker sentiment also came on political uncertainties surrounding 1Malaysia Development Bhd (1MDB).

The KLCI closed at 1,755.05 points at 5pm. For comparison, the FBM Small Cap index fell 61.38 points or 0.38%.

The FBM Small Cap comprises companies within the top 98% portion of Bursa Malaysia's Main Board.

The FBM Small Cap, however, excludes stocks under the FBM Top 100 list.

A remisier told theedgemarkets.com that the possibility of an earlier than expected US interest rate hike had led to an outflow of funds from the Malaysian market.

Anticipation of higher US interest rates does not bode well for emerging Asian markets like Malaysia as global funds flow back into US-based assets. As such, the ringgit weakened to 3.6365 against the US dollar today.

"It (US rate hike) might come as soon as September and so, you see foreign funds leaving the market. This may continue for the next few days,” said the remisier.

Asian share markets retreated. Hong Kong’s Hang Seng closed 0.6% lower while South Korea’s Kospi lost 1.68%.

In Malaysia, government-owned 1MDB was closely watched. SJ Securities Sdn Bhd remisier K.C. Goh said negative 1MDB newsflow had affected market sentiment and put the local bourse under selling pressure.

Goh said unanswered questions on 1MDB had not augured well for local shares.

“I think unanswered questions over 1MDB's dealings have caused local investors to be unsettled. It has really impacted market sentiment and retailers are put off by the uncertainties of this political landscape.

“The longer we take to resolve the 1MDB-related issues, the more negative the impact it will have on the country and the market. I believe the market will show a sharp recovery once a solution to the complaints have been found,” Goh said.

Across Bursa Malaysia, there were 506 decliners over 274 gainers while 327 counters were unchanged.

There were 1.78 billion shares worth RM2.19 billion traded. Yesterday, 1.58 billion shares worth RM1.94 billion changed hands.

Today, top gainers included Petronas Gas Bhd and Hong Leong Financial Group Bhd. Top decliners included Dutch Lady Milk Industries Bhd and Kuala Lumpur Kepong Bhd.

The most-actively traded stocks included Xinghe Holdings Bhd and Sumatec Resources Bhd.