CONTINUED foreign selling on Bursa Malaysia caused the FBM KLCI to plunge below the critical 1,800 level this morning, a day after the KLCI ranked as Asia-Pacific’s worst performer.

At 9.50am, the 30-stock KLCI was down by 28.59 points, or 1.58% to 1,775.66.

The FBM KLCI fell 2.21%, or 40.78 points at 1,804.25, at closing yesterday, after Finance Minister Lim Guan Eng and Prime Minister Dr Mahathir Mohamad revealed more details on the country’s fiscal position, especially the government’s actual debt of RM1 trillion.

The sellout on the bourse is largely due to investors being spooked by the confirmation of higher than reported debt levels, coupled with the removal of the goods and services tax and reinstatement of petrol subsidies, said a local investment banker.

Yesterday’s decline was the biggest in over two years for the benchmark index, while the entire stock exchange saw RM31.7 billion wiped off the market in a single trading day, with 763 decliners and 237 gainers, reported The Edge Markets.

Rakuten Trade Sdn Bhd vice-president of research Vincent Lau remained positive on the Malaysian stock market, despite the sharp decline and urged investors to look past the “noise” dominating headlines.

“If you look at the index, the drop is quite drastic. The RM1 trillion headline has spooked the market,” Lau was quoted as saying.

He said it was still too early to consider a downgrade on Malaysia’s credit rating, as the new government had just taken over and rating agencies were likely to take some time to evaluate policy changes.

However, an analyst requesting anonymity said the Pakatan Harapan government was trying to downplay expectations by highlighting some of the country’s financial problems.

“I think the RM1 trillion debt is just being highlighted to manage expectations. If you look at the numbers, it’s not something new. Of course, there is not much clarification by the ministers at the moment,” he told the daily.

Nevertheless, he was optimistic on some of the new government’s measures to curb its operating expenditures, such as the 10% deduction in salary for ministers, the abolishment of the Land Public Transport Commission, which will be absorbed into the Transport Ministry, and the government’s commitment to reduce the RM1 trillion debt. – May 24, 2018.