Malaysian market feeling jittery from Brexit

Malaysian market feeling jittery from Brexit

PETALING JAYA: Shares on Bursa Malaysia extended last week's losses alongside global markets, with the Brexit referendum and the US Federal Reserve's policy meeting both coming up in the next ten days, which could have an immediate impact on the capital markets, say analysts.

The FBM KLCI closed down 11.45 points to 1,629.77 points yesterday, with the broader market equally bearish with losers outnumbering gainers by more than three to one.

Local sentiment was also hammered by a steady outflow of foreign funds from the stock market.

"Markets are looking ahead to significant risk build-up in the immediate term from the US Fed's interest rate decision on June 15 and the week after's Brexit vote on June 23.Volatility is likely to spike up and commodity prices could adjust downward," said AmBank Research in its weekly commentary yesterday.

Asian equities tumbled, with the MSCI Asia Pacific Index falling by 2%, extending last week's losses.

Hong Kong's Hang Seng Index and Japan's Nikkei 225 declined by 2.5% and 3.4%, respectively, on Monday, as optimism gave way to fear that the two upcoming events could have far-reaching consequences.

The ringgit fell alongside emerging market currencies, as the British pound heads to its lowest point in five years.

Against the greenback, the ringgit fell to 4.0918 yesterday, compared with 4.0715 last Friday.

Elsewhere, crude oil dipped below the US$50 (S$67.83) mark again after a recent rally proved to be short-lived.

Gold and US Treasuries climbed, as risk-averse investors continue to flock towards safe-haven assets.

In its weekly fund flow report, MIDF Research noted that foreign selling on Bursa Malaysia continued for the seventh consecutive week as of last week.

"Last week's foreign withdrawal further reduced the cumulative net foreign inflow thus far this year to an estimated RM1.1bil (S$0.365billion). In retrospect, foreigners had offloaded RM19.5bil  and RM6.9bil in 2015 and 2014, respectively," it said.

There are also signs that overall market liquidity has been on a downtrend recently.

According to MIDF, total foreign participation fell to RM809.9mil last week, or the lowest weekly figure so far this year.

Similarly, local insitutional participation also fell to RM2.2bil last week, compared to the prior week's RM1.93bil.

Meanwhile, new data emerging from China yesterday suggested that its economy was stabilising.

The country's industrial production rose 6% from a year earlier in May, matching economists' estimates.

Additionally, retail sales grew by 10%.

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