Equity rout in Asia, KLCI slumps more than 3%

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KUALA LUMPUR (March 9): The FBM KLCI slumped 3.1% at mid-morning as the local index fall sharply in line with the equity rout in Asia as coronavirus fears shook markets while crude oil prices plunged.   

At 10am, the FBM KLCI lost 44.52 points to 1,438.58.

Market breadth was negative with 887 losers and 59 gainers, while 130 counters traded unchanged. Volume was 1.93 billion shares valued at RM734 million.

The top losers included Kuala Lumpur Kepong Bhd, Carlsberg Brewery Malaysia Bhd, Panasonic Manufacturing Malaysia Bhd, Yinson Holdings Bhd, Petronas Chemicals Group Bhd, British American Tobacco (M) Bhd, Petronas Dagangan Bhd, Dayang Enterprise Holdings Bhd, Heineken Malaysia Bhd and MISC Bhd.

The actives included Sapura Energy Bhd, Velesto Energy Bhd, Hibiscus Petroleum Bhd, Bumi Armada Bhd, Perdana Petroleum Bhd, Vivocom International Holdings Bhd, Vortex Consolidated Bhd, Daya Materials Bhd and KNM Group Bhd.

The gainers included Malaysia-listed Hang Seng Index-linked put warrants.

Reuters said Asian shares sank on Monday as panicked investors fled to bonds to hedge the economic shock of the coronavirus, and oil plunged more than 20% after Saudi Arabia slashed its official selling price.

The world's top oil exporter plans to raise its production significantly after the collapse of OPEC's supply cut agreement with Russia, a grab for market share reminiscent of a drive in 2014 that caused prices to slump by around two thirds, it said.

Hong Leong IB Research said investors are likely to witness an extended downward consolidation with wild swings on the Dow (24,600-27,200 levels) in the near term amid lingering concerns about the economic impact as the Covid-19 outbreak has the potential to become a pandemic, significantly affecting global trades and travels as well as US corporate earnings and economic growth in the mid to long term.

“Nevertheless, the pre-emptive 0.5% rate cut by the Fed and the US$8 billion emergency fund being passed by the lawmakers to combat [the] Covid-19 outbreak in the US are likely to cushion further sharp correction, barring further devastating coronavirus outbreak in US.

“Given the bearish Dow’s outlook, we expect KLCI to lock in near term consolidation (range bound within 1,456-1,517) amid domestic political crisis and pending the new PM’s cabinet line-up coupled with the ongoing Covid-19 situation.

“Meanwhile, worries over the implementation of Budget 2020 as well as the RM20 billion economic stimulus package resurface as oil prices last Friday crashed to US$45.50 (-40% from 52-week high of US$75.60 and -26% lower than average US$62 petroleum-related revenue crude oil price assumption by MOF).

“Hence, in the near term, the priority for equity investors should be the preservation of capital, with core holdings in defensive and resilient high-yield stocks,” it said.