Tuesday, January 22, 2013

Election Jitters Push KLCI Down 2.4%

KUALA LUMPUR (Jan 21): The benchmark FBM KLCI plunged 40.8 points or 2.4% to a five-week low in active trade as the deadline for the 13th general election draws near amid political rumours.

This single day fall of 2.4% has not been seen in eight months, and the market’s volume of 1.83 billion shares was close to a 10-month high.

Election jitters resurfaced after many people received text messages stating that Parliament would be dissolved on Feb 22. If this is the case, then the general election is likely to be held by mid-March.

According to the Constitution, the government of Prime Minister Datuk Seri Najib Razak must call for an election by April 27, but to hold the federal election together with some state elections, he must call it earlier.

While most research analysts believe Najib will regain control of the federal government, albeit by a smaller margin, there are rumours circulating that there are some quarters within his own political party Umno who are lobbying for his downfall.

"It will be bad for the stock market if Najib is not returned to power. He is very business-friendly," said a senior dealer.

Lee Cherng Wee, senior research analyst at JF Apex Securities, told theedgemalaysia.com: "The specific election risk to our country is causing the sell-down by local and foreign funds. This had happened in past elections."

At 5pm, the KLCI had fallen 40.81 points or 2.4% to 1,635.63, after touching an earlier low of 1,630.99. The plunge was caused by major falls in index-linked heavyweights, such as Axiata, Public Bank, CIMB, Maybank and Sime Darby, which were also top turnovers due to their heavy trades.

Losers thumped gainers by 904 to 85, while volume traded was 1.83 billion shares worth RM2.6 billion, which had not been seen for months.

According to dealers, the market was also affected by a report today in The Edge Financial Daily and theedgemalaysia.com that many investors recently discovered that confidential information in their CDS accounts on Bursa Malaysia had been leaked to strangers. But the dominant factor was still the pre-election jitters.

The local market plunged by as much as 1.6% in mid-morning trade and continued to deteriorate after the lunch break.

Asian shares pulled back from multi-month highs today, while the yen firmed after touching a new low in choppy trade ahead of a Bank of Japan policy decision that is expected to deliver bold monetary easing measures.

The MSCI's broadest index of Asia-Pacific shares outside Japan edged down 0.2% despite pockets of strength in Australia, Hong Kong and Shanghai. The index briefly renewed a 17-1/2-month high touched on Friday following a rebound in global equities late last week on upbeat US and Chinese data, as well as signs of progress in US budget talks.

The Dow Jones Industrial Average and the Standard & Poor's 500 Index ended Friday at five-year highs on a solid start to the quarterly earnings season. US markets are closed on Monday for the Martin Luther King Jr holiday.

"Asian markets are mixed with no dominant theme in place in a fairly quiet start to the week," said Stan Shamu, market analyst at IG Markets. "There hasn't been any economic data to go by in the region and therefore we've had to rely on leads from the weekend for some direction."


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