Malaysia's bourse running out of steam?

PETALING JAYA: Shares on Bursa Malaysia may have hit a speed bump on earnings worries and trickling foreign interest, as the benchmark index fell for a third day in a row despite renewed advances in both the ringgit and crude oil.

In contrast, both United States and Asian markets broke new highs this week, as investor sentiment towards equities continued to improve.

“The ringgit and crude oil continued to strengthen, but stocks are no longer following suit. There could be a greater downward momentum going forward, given that the index has failed to advance further over the past one month,” said the head of research of a bank-backed research house.

The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) closed down 2.24 points to 1,708.91 yesterday, having failed to sustain its advance after hitting an eight-month high of 1,727.99 points on April 15.

Over the past one month, the market has fluctuated in a tight range of between 1,700 and 1,725 points.

Elsewhere, the ringgit remained near its highest this year and was last traded at RM3.8667 to the dollar as at 6pm. Brent crude, meanwhile, was last traded at US$43.14 or not far from its recent year-to-date high of US$44.69.

As at Wednesday, the FBM KLCI had declined by 1.1% in value this week. On the other hand, the MSCI Asia ex-Japan Index, which is considered the regional benchmark, had risen by 3% over the same period.

However, despite yesterday’s close at 1,708.91 points, which represents its lowest close in April, the benchmark index has risen by 3.35% so far this year.

One sign of the recent uptrend slowing down is the lower level of foreign capital inflows in recent weeks.

According to MIDF Research in a recent note, for the week ended April 15, total foreign participation in stocks on Bursa Malaysia declined by 13%, having fallen by 16% the previous week.

Overall liquidity in the market has also fallen. The average daily value of shares traded last week amounted to RM833mil, which is the lowest weekly value so far this year, the research house noted.

Potential catalysts in recent days that could have propelled the index forward have also proven to be underwhelming.

A much-anticipated meeting between oil majors on April 17 failed to result in an agreement to freeze production, while China’s latest economic data on Monday showed that the country’s growth had sputtered to 6.7% during the first quarter of this year.

In a note yesterday, Hong Leong Investment Bank Research said that the trend of the FBM KLCI is likely to remain negative in the immediate future.

“The index is expected to see further consolidation due to fragile technical indicators, which have been on a downside bias since late March.

“Going forward, the FBM KLCI is set to test the support level of 1,700 points,” it said.