PETALING JAYA: The jubilant mood of the New Year seems to have quickly worn off for Bursa Malaysia, with the benchmark index falling below the 1,600-point psychological level once again as tensions in the Middle East escalate.
The FBM KLCI skidded as much as 18.3 points or 1.1% to 1,593.08 points before closing at 1,597.76 points today, down 13.62 points or 0.85%. Market breadth was negative with 646 losers against 269 gainers.
Most of the indices showed losses, with the exception of the energy and REIT sectors, which gained 2.15% and 0.94% respectively.
Oil and gas counters remained the most actively traded on Bursa, including Alam Maritim Resources Bhd, Sapura Energy Bhd, Velesto Energy Bhd and Hibiscus Petroleum Bhd.
On the currency front, the ringgit closed lower at 4.1055 against the US dollar, compared with 4.1015 last Friday.
The markets were feeling the impact from rising tensions between the US and Iran, following the slaying of top Iranian military commander Qassem Soleimani on Friday, which could set off new conflicts in the Middle East that night have global consequences.
Malacca Securities said with the rising tensions between the two military powerhouses, the upside bias for the local indices will become increasingly difficult to attain.
The FBM KLCI’s support level remains pegged at 1,590 points but the resistance level is now between 1,618 and 1,623, it said.
In the region, Singapore’s Straits Times Index closed 0.62% lower, Hong Kong’s Hang Seng Index was down 0.79% and Tokyo’s Nikkei 225 tumbled 1.91%.
In a note, FXTM chief market strategist Hussein Sayed said investors will remain on the defensive today as everyone now awaits a retaliatory response by Iran.
“This may not be an immediate one, but rather a protracted event which investors need to carefully calculate when - their portfolio’s risk,” he said.
TA Securities said choppy trading can be expected for the whole of this week, but the rise in geopolitical tensions could turn out to be a blessing in disguise as oil & gas-related stocks should bounce back significantly as global oil prices rally.
“Key overhead index resistance remains near the 200-day moving average level at 1,617, which must be convincingly breached to assist further upside challenge of higher targets at 1,630 and 1,639.
“Stocks wise, defensive gaming and utility blue chips such as Axiata Group Bhd, DiGi.com Bhd, Genting Bhd and Genting Malaysia Bhd should attract bargain hunters looking for eventual recovery upside. Semiconductor and property related lower liners like Aemulus Holdings Bhd, Unisem (M) Bhd, Malaysian Resources Corp Bhd and UEM Sunrise Bhd should also attract buyers anticipating recovery upside ahead,” it said.
Looking ahead, Kenanga Research said upside potential still remains for the market.
“Chart-wise, the index is still holding itself to trade above all of its key simple moving averages. From here, we expect the index to test resistance levels at 1,630 and 1,650 . Meanwhile, support levels to watch out for are 1,550 and 1,540,” it said.
Maybank IB Research also said de-escalating trade tensions between the US and China, coupled with the government’s strong direction on future policies and political stability are expected to spur the FBM KLCI to overturn its extended downtrend this year.
“This recovery potential is supported by dominating domestic funds, having retreated to the sidelines to sit out current uncertainties, being heavily cashed-up, while the bulk of foreign investors selling appears to have been completed, given the tapering monthly net foreign selling over 2019,“ it said.
