The outlook for Malaysia's bourse is gloomy for the week ahead, after a 41-percent fuel price hike that has triggered fears of inflation and lower economic growth, analysts said on Friday.
The move has compound jitters over political uncertainty in Malaysia, in the wake of a drubbing for the government in March general elections that have led to calls for Prime Minister Abdullah Ahmad Badawi to resign.
"Higher energy costs will inevitably hurt consumer spending and erode corporate profits and this is likely to be reflected by further declines in share prices in coming weeks," a dealer told Dow Jones Newswires.
Wednesday's surprise price hike saw the market sink 2.4 percent in the following session, but it closed 2.0 percent higher on Friday as state utility Tenaga Nasional enjoyed a bounce on news of a tariff increase. The government's decision to rein in subsidies led many brokering houses to lower their predictions for the KLCI over the remainder of this year.
"Our house view has cut the year-end target to 1,210, with the higher fuel cost which could dampen the operating business environment as well as pose a threat to interest rates," said TA Securities. For the week ending June 6, the benchmark composite index lost 2.1 percent or 27.53 points to 1,248.57. Daily volume averaged 515.4 million shares worth 1.46 billion ringgit (453 million dollars), compared with 513.6 million shares worth 1.35 billion ringgit the previous week.
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