Stocks, ringgit fall on rating outlook worries

PETALING JAYA: The stock market dived as much as 25.58 points or 1.59% yesterday on renewed worries over Malaysia’s sovereign ratings outlook.
On Tuesday, two international rating agencies Moody’s Investors Services and Fitch Ratings warned that ongoing political uncertainties could be credit negative should it undermine Malaysia’s fiscal reforms and robust growth outlook.
The FBM KLCI broke the 1600-point psychological level to close 19.02 points or 1.18% lower as heavy-weighted banking stocks came under heightened selling pressure.
Malayan Banking Bhd (Maybank) was the top decliner among its peers, registering a 35 sen or 3.99% drop to RM8.42 on some 33.73 million shares done, being the tenth most actively traded stock.
Public Bank Bhd, AMMB Holdings Bhd, RHB Capital Bhd and CIMB Group Holdings Bhd fell 26 sen, 24 sen, 12 sen and 7 sen to RM17.74, RM4.40, RM6.25 and RM4.77 respectively.
A total of 1.89 billion shares with a transacted value of RM2.13 billion changed hands, reflecting the selling pressure mainly in the mid- and big-cap stocks. However, gainers outweighed decliners on the local bourse with 379 against 347.
The local stock market’s fall was also in line with lackluster performance across regional markets as US weak manufacturing data ignited concerns over slower global economic growth amid a US first rate hike expected this month.
Maybank IB Research analyst Lee Cheng Hooi in his research note yesterday said FBM KLCI’s medium-term downside targets of 1,448 and 1,414 will still prevail.
“Selling the rebound rallies and keeping more cash will be very wise,” he advised.
Besides domestic risks, Hong Leong Investment Bank Research analyst Nick Foo Mun Pang said the recent global market carnage due to persistent external concerns such as the timing of the Fed’s tightening, slowing global economy and sliding commodities prices, will exert pressure on the KLCI in the near term.
The ringgit, meanwhile, weakened to an intra-day low of 4.2315 yesterday, the biggest drop in more than a week as the slump in global crude oil prices continues to dampen government revenue as Malaysia is an oil-exporting country. Oil prices fell 2% yesterday to US$48 (RM202.08) a barrel due to stronger-than-expected build in US crude oil stocks and weak manufacturing data.
As at 5pm yesterday, the ringgit traded at 4.2110 against the greenback.
Moody’s said that the large political protest over the weekend reflected the ongoing political uncertainties that could further undermine market sentiment and capital inflows.
Fitch said it has long factored in weak governance into the country’s sovereign rating and that economic factors – including progress in fiscal consolidation, the resilient growth and renewed pressures on external finances – remain more important for now in the agency’s assessment of the credit trajectory.
Moody’s and Fitch’s remarks came after a 34-hour rally in Kuala Lumpur over Merdeka, which pushed Malaysia back into the spotlight.