PETALING JAYA: The local bourse bucked the regional trend and skidded 20.55 points or 1.22% today as the market was bogged down by heavy selling in banking stocks amid the US Federal Reserve’s dovish outlook.
The FBM KLCI closed at an intraday low of 1,663.66 points against Wednesday’s closing of 1,684.21.
Market breadth was negative with losers beating gainers 547 to 302. A total of 2.96 billion shares valued at RM2.15 billion were traded.
The Financial Services Index tumbled 225.12 points or 1.29% to 17,219.51 points.
Among the top losers on Bursa Malaysia were Public Bank Bhd, Hong Leong Bank Bhd and AMMB Holdings Bhd, which fell 60 sen, 46 sen and 14 sen to RM23.86, RM20.34 and RM4.47, respectively.
Malayan Banking Bhd and CIMB were down 7 sen and 6 sen to RM9.40 and RM5.33, respectively.
Inter Pacific Research Sdn Bhd head of research Pong Teng Siew told SunBiz that the Fed’s dovish stance on the benchmark rates is causing some consternation among the investors about banking stocks as Bank Negara Malaysia (BNM) is likely to lower the Overnight Policy Rate.
“This is because if the lending rate drops, the banks’ lending margins could possibly become slightly weaker,” he said.
Rakuten Trade Sdn Bhd head of research Kenny Yee Shen Pin concurred, saying that the Fed’s dovish stance on the benchmark rates provides room for BNM to look into the possibility of a rate cut to support Malaysia’s economic growth and in turn the stock market may see a boost from easing monetary policies.
“This would provide further impetus to sustain economic growth and also the equity markets. However, global growth remains a concern,” he said in a research note.
Pong opined that any rate cut will depend on the country’s economic performance, such as gross domestic product growth.
“At this moment, I think the interest rates are quite adequate to maintain economic growth. I don’t think it has reached the point where BNM feels pressure to lower interest rate yet,” he added.
Additionally, Pong said Finance Minister Lim Guan Eng’s recent remarks on the possible imposition of windfall taxes on banks if they continue on being conservative in lending also contributed to the sell-off in banking stocks.
Lim, however, has clarified that the government has no intention to impose such taxes on banks.
Meanwhile, Pong pointed out that Malaysia stands to benefit from the Fed’s dovish stance it provides room for the ringgit to strengthen further given the weakening of the US dollar, and thus help to lower the inflation rate.
“The fact that the US Fed has left the outlook for interest rates to be unchanged for the rest of the year makes it more likely that BNM may actually lower interest rates. Therefore, US dollar might weaken and with that, the pressure on ringgit will be less as the dollar weakens,” he explained.
The ringgit climbed to an eight-month high of 4.0545 against the US dollar. As at 5pm today, the Malaysian currency was trading 0.22% higher at 4.0625 against the greenback..
