The development mere days before the default deadline fuelled optimism in markets worldwide, especially in Asia where stock exchanges have been wallowing in a sea of red recently.
The tech-heavy Nasdaq Composite surged 1.3% and the S&P 500 added 1% to reach their best closing levels in over nine months while the Dow gained 0.5% yesterday.
In Asia today, Hong Kong’s Hang Seng Index soared 4.02% while the benchmark Shanghai Composite Index climbed 0.79%. Japan’s Nikkei average climbed 1.21% while Seoul stocks closed at a one-year high as the Kospi average gained 1.25%.
Closer to home, Singapore’s Straits Times Index saw a 0.24% rise while Thailand’s SET Index rose 0.64%.
However, the FTSE Bursa Malaysia KLCI (FBM KLCI) bucked the regional trend by closing 0.13% or 1.75 points lower at 1381.26 today. This does not really surprise savvy investors.
So, why is the KLCI the odd man out?
US debt ceiling not a crucial factor
An analyst remarked the benchmark index was impacted more by domestic factors rather than the US debt ceiling episode.
“The US debt ceiling is really a non-issue given that this is not the first time (this scenario has happened),” said MIDF director and head of research Imran Yassin.
He said the debt ceiling issue only affects Malaysia in the very short term, adding that there are other larger domestic factors keeping the local bourse down.
Imran suggested that the FBM KLCI may be underperforming due to the strong selling pressure on banking stocks, which weighs heavily on the benchmark index, but not on other indices.
“If you look at the FBM 70, it has been performing in tandem with global performance and is up today,” he said.
The FBM 70 was up 0.32% or 42.83 points to 13,504.64 at the close of the market today.
Areca Capital CEO Danny Wong concurred with Imran’s view, saying the US debt ceiling resolution was not the main factor for FBM KLCI’s recent weak performance.
Instead, he highlighted local issues, such as foreign outflow of funds, weaker reported corporate earnings, and slow economic recovery, as the main contributors to FBM KLCI’s laggard showing.
Despite the lacklustre performance of the KLCI, Wong remains hopeful of a better performance in the second half of the year, assuming there is improved sentiment after the upcoming state elections.
This, he said, would also be contingent on recovering corporate earnings, better trade flows (such as inbound tourists from China), and better export and domestic consumption.
“We need to prove our growth and economic resilience to attract inflows and foreign direct investment (to strengthen our currency),” he said.