Malaysia's stock index heads for bear market amid ringgit slump

An investor monitoring share market prices at a brokerage firm in Kuala Lumpur, Malaysia, on Aug 24, 2015.
An investor monitoring share market prices at a brokerage firm in Kuala Lumpur, Malaysia, on Aug 24, 2015.PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG) - Malaysia's stocks fell on Tuesday (Aug 25), with the benchmark index poised to enter a bear market, as a global rout deepened and concern grew over the nation's economic growth.

The FTSE Bursa Malaysia KLCI Index lost as much as 1.9 per cent to 1,503.68 at 9:05 am. The gauge has fallen more than 20 per cent from its 2014 high.

The Malaysian ringgit fell further on Tuesday (Aug 25), into uncharted territory against the Singapore dollar. It slumped to a low of 3.0303 at 8:12am before recovering to trade at 3.0194 at 8:45am.

The Malaysian unit fell about 1.4 per cent on Monday to settle at 3.0166 to one Singdollar, leaving it down 19 per cent from a year ago.

Foreign funds have dumped more than US$3 billion of the nation's shares this year and the currency is at a 17-year low as political uncertainty clouds the outlook for an economy rocked by plunging oil prices and an emerging-market selloff.

Prime Minister Najib Razak is also grappling with allegations of financial irregularities at a state investment company, and facing accusations of impropriety after it was disclosed that political donations ended up in his private accounts in 2013.

Emerging markets are reeling after China's yuan devaluation Aug. 11 sparked concern the world's second-largest economy will slow further, undermining demand for oil, copper and other raw materials from countries including Brazil, Russia and South Africa. Malaysia is Asia's only major net oil exporter.

The rout comes as the Federal Reserve moves closer to raising borrowing costs for the first time in almost a decade, after central banks worldwide boosted stimulus measures to patch up economies following the global financial crisis.

Net foreign sales in Malaysian stocks this year are almost double the RM6.9 billion for the whole of 2014, exchange data show.

Malaysia's government forecasts the economy will expand 4.5 per cent to 5.5 per cent this year, down from its earlier projection of as much as 6 per cent, as a plunge in Brent crude prices cut revenue.

Earnings at companies on the KLCI are projected to grow 11 per cent in the next 12 months, data compiled by Bloomberg show. That compares with a 30 per cent gain in Thailand and an increase of 78 per cent in Indonesia.

The KLCI index is valued at 13.7 times projected 12-month earnings, down from its April peak of 16.5 times, data compiled by Bloomberg show. The MSCI Emerging Markets Index is valued at a multiple of 10.