KUALA LUMPUR (Aug 5): Bursa Malaysia's fundamentals remain strong, even as global equities fall in response to a softer-than-expected US jobs report that heightened recession fears, UOB Kay Hian Wealth Advisors Sdn Bhd head of Investment Research Mohd Sedek Jantan said.

He said the global rout was merely due to panic selling and overreaction among investors, with the ultimate driver for Monday's decline largely influenced by the substantial sell-off in Japan, where the Nikkei 225 plummeted by more than 12%.

“Investor confidence has also crumbled due to the surge in the yen. The latest US Institute of Supply Management (ISM) data and job reports have sparked discussions over the weekend regarding the likelihood of a US recession based on the Sahm Rule,” he told Bernama.

The Sahm rule signals a recession when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more, relative to its low during the previous 12 months.

The US hiring slowed to 114,000 jobs in July, the US government said on Friday, missing expectations.

The unemployment rate rose to 4.3% versus the expected 4.1%, its highest level in nearly three years.

On top of that, Mohd Sedek said the perception that the strengthening ringgit leads to reduced profits in certain sectors and makes stocks more expensive has also exacerbated the situation.

“If the heavy selling reduces tomorrow, the FTSE Bursa Malaysia KLCI (FBM KLCI) may trade between 1,590 and 1,600 levels. The market will rebound as a drastic drop or drastic spike is always temporary and not sustained,” he added.

Despite the bearish market performance, he highlighted that the technology and financial sectors remain attractive.

This week, several defensive companies are scheduled to release their earnings reports, and will likely support the US equity market.

“These announcements could foster a sense of calm in the markets,” he said.

Top US pharmaceutical companies Amgen, Novo Nordisk and Eli Lilly are scheduled to release their second-quarter results this week.

At 4.02pm, the FBM KLCI lost 4.36% or 69.69 points to 1,541.36, off its intraday low of 1,532.24 during the mid-afternoon session.

Market turnover grew to 8.03 billion units worth RM6.4 billion.

https://www.theedgemarkets.com/node/721720