By Lawrence Yong
Malaysia’s stock market remained volatile Wednesday, tumbling first and then recovering on news that Prime Minister Najib Abdul Razak announced the dissolution of Parliament today, paving the way for the 13th general election.
The PM however added that any change in power at the state and federal level should be peaceful in an apparent bid to assuage any fears of instability.
The Benchmark FBM KLCI index which had been heading for 11 week highs on Tuesday, took a near 50 point dive in early trade, falling nearly 3 percent to below 1,640 levels, before rebounding to 1,670. It recovered after the announcement and is down 14.15 points at 1 pm.
The market’s traded volumes were however thin, with about 900 million shares exchanged, most of the activity seen in early morning trade.
“The market took so many days to come up and to lose it all in one day… this shows the market is under pressure,” one analyst from Alliance Research said.
The KLCI, which tracks the top 30 shares by market cap, has not been below 1,640 levels since March 26, analysts said and if that level is breached the next support level may be 1,600 mark. The market last traded briefly below 1,600 levels in November last year before talk of national elections gained momentum.
The 13th general elections are expected to be the most hotly contested ever as the ruling Barisan National coalition faces off with Pakatan Rakyat for a second round, after the opposition denied BN a two thirds majority in parliament in 2008. After the last election, former prime minister Abdullah Badawi stepped down to take responsibility as the incumbent BN government has been mostly unchallenged in its 56 years rule in Malaysia.
“Traders don’t like uncertainty. They will always look to take profit first and let the market take its own course,” one analyst said.
The KLCI index has been one of the worst performing stock markets among Asian bourses so far this year and despite global equities markets reaching record heights, the KLCI has been trapped in negative territory for nearly three months.
“The past 2 weeks have witnessed perhaps the most aggressive moves by foreign funds in the past two years to dress up their portfolio performance,” broker Interpacific Research noted.
Blue chips stocks such as CIMB, Maybank, Genting and Tenaga Nasional were among lead gainers in the last one week.
There was much optimism in the market last week before jitters set in on Wednesday.
“It may not be so evident in the performance of the index, but we believe there is a latent sense of optimism among foreign investors that the market will “explode” should the Government win a convincing mandate in the looming General Election,” MIDF Investment Research noted.
According to MIDF, so far this year, foreign investors have already bought an increment of RM9 billion net of Malaysian equity, compared with increase of RM13.7 billion for the whole of 2012.
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