KLCI to remain volatile amid US midterm election spillover [WATCH]

KUALA LUMPUR: Investors should brace for a volatile KLCI amid geopolitical risks, domestic political uncertainties, and inflationary pressures, according to analysts. The global technology stock sell-off, triggered by a sharp sell-off on Wall Street, has weighed on investor sentiment despite resilient domestic economic fundamentals.

Affin Hwang Investment Bank's Loong Chee Wei expects the KLCI to remain volatile due to elevated global bond yields and uncertainty surrounding US policies, particularly related to artificial intelligence (AI) and data centers. The Nasdaq fell 5.5 percent, with Japan's Nikkei and South Korean and Taiwanese benchmarks also falling more than eight percent.

The sell-off was felt locally, with the KLCI falling 23.53 points, or 1.4 percent, before recovering slightly. Technology stocks suffered the steepest declines, reflecting concerns over potentially tighter US regulations on AI. Analysts point to geopolitical developments as a key risk, particularly uncertainty surrounding US government policies on AI and data centers.

Domestically, investors will monitor developments ahead of the Melaka state election on November 14. However, Malaysia's economic and corporate earnings fundamentals remain supportive of the KLCI at current levels. While a sustained rebound depends on global market sentiment and foreign fund flows, Malaysia is considered a relative safe haven in the region due to its position as a net oil and gas exporter, growing current account surplus, and strong investment cycle.