RM159bil in paper losses

PETALING JAYA: Investors in Bursa Malaysia are poorer by more than RM159bil since July 15 due to the steep decline in the ringgit and commodity prices.

This figure is based on the drop in the market capitalisation of 919 counters traded on Bursa, which now has an estimated combined market capitalisation of RM1.49 trillion.

On July 15, or just before the ringgit began its rapid decline against the US dollar, the value was more than RM1.65 trillion.

Foreigners have been net sellers of Malaysian shares, dumping more than RM15bil worth of equity so far this year, as the ringgit continued to slide to reach 4.259 to one US dollar yesterday – its weakest level since 1998.

Year-to-date, the ringgit is down 18% against the greenback, making it one of the worst performers in the Asian region.

Against its closest neighbour, the ringgit breached the crucial RM3 to one-Singapore-dollar level in yesterday’s trade.

Analysts have predicted more downtrend for the local markets in the immediate term, exacerbated by a confluence of negative factors such as uncertainties in the local political scene, which are largely due to the ongoing 1Malaysia Development Bhd issue.

This issue has caused a big debate among leaders in Umno.

“But generally, the over-riding factors to the market weakness are slowing economic growth globally, weak oil and palm oil prices and fears of an impending rate hike by the Federal Reserve that could cause further capital flight to the United States and other developed markets,” said an analyst.

They also said that concerns about China’s economy going into a hard landing had spooked developed markets such as Wall Street. The impact was already felt in the Dow Jones last Friday and is likely to continue for the next few days.

A technical analyst said indicators point to the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) continuing on a downtrend even though the market has already shed more than 18% from its recent high in March.

Notably, a drop of more than 20% signals a bear market.

“The immediate support for the FBM KLCI is anticipated at the 1,525-1,527-point range, of which a slip below this line would see the lower 1,500-point psychological level and the 38.2% Fibonacci retracement of 1,478 points becoming vulnerable,” said a senior technical analyst.

“The market is now on an extended bearish mode and any technical rebound will not be sustainable unless there is a complete shift in global sentiment from negative to positive and more certainty on our political front.”

Based on the current market scenario, he said the 1,350-point level would be an attractive level for bargain-hunters to go in, but cautioned that investors should be ready to cut losses if the market showed no signs of stability at that level.

The FBM KLCI finished at the day’s low of 1,532.14 yesterday, down by 2.7% or 42 points – its lowest level since May 2012.

A plunge of 3% in US markets last Friday and a sea of red across its regional neighbours helped add to the selling pressure.

A total of 941 counters ended lower, with only 100 finishing the day higher.

“We have trimmed weights earlier and are looking to reposition into Asian equities at the opportune time,” Fortress Capital Asset Management fund manager Thomas Yong told StarBiz.

“Headline growth numbers didn’t help and the recent price drop in share prices was largely portfolio-driven, as investors’ confidence collapsed,” Yong added on Malaysia.

Meanwhile, in a note issued to clients, Citi Research said while punitive capital controls to stabilise the ringgit were unlikely, implicit ones such as the introduction of more bureaucratic hurdles for resident companies trying to move money offshore were possible.

In the commodity markets, more gloom ensued, as crude oil trading in US dollars slipped below the US$40-per-barrel level yesterday – its first time since 2009 – on growing concerns of oversupply and lower demand from large economies like China, which are expecting slower economic growth.

Likewise, crude palm oil, which is also closely tied to China demand, is trading at a multi-year low of RM1,916 per tonne.