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Malaysia: Stocks set for correction as scandal spurs outflows
[KUALA LUMPUR] Malaysian stocks fell, with the benchmark gauge poised to enter a technical correction, as investors pulled funds amid concern about the political scandal enveloping Prime Minister Najib Razak and the worsening economic outlook.
The FTSE Bursa Malaysia KLCI Index slid 1.3 percent to 1,661.41 at 10.04 am local time, on course for the lowest close since March 2013. The measure has lost more than 10 per cent from its April 21 peak. The ringgit was little changed at its lowest level since 1998.
Foreign funds have dumped US$3 billion of the nation's shares this year amid concern the crisis will distract Najib as a commodities rout and the prospect of higher U.S. interest rates threaten economic growth. The prime minister is fighting off a scandal linked to 1Malaysia Development Bhd, a debt-ridden state investment company.
"Sentiments will remain bearish, and stocks will be volatile in the short term," Danny Wong Teck Meng, chief executive officer of Kuala Lumpur-based Areca Capital, which manages about US$224 million in assets, said by phone. "We have trimmed some holdings of volatile stocks. We are looking to add on more defensive and blue chip stocks."
Foreign-exchange reserves fell below US$100 billion for the first time since 2010 last month, the central bank reported after markets closed on Friday. Overseas ownership of the nation's government and corporate debt dropped 2.4 per cent in July to 206.8 billion ringgit (S$72.9 billion), the least since August 2012, other data released Friday showed.
Malayan Banking, the nation's largest bank, dropped 1.9 per cent, the biggest drag on the KLCI. CIMB Group Holdings, sank 2.5 per cent, poised for the lowest close since Sept 2009. Malaysia's ringgit depreciated 2.6 per cent last week, its biggest loss since December.