KUALA LUMPUR, June 22 (Bernama) -- Bursa Malaysia ended on a softer note today as investors engaged in profit-taking following the recent rebound in the local market, an analyst said. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) declined by 0.65 per cent, or 11.19 points, to 1,700.84 from last Friday's close of 1,712.03. The benchmark index opened 1.56 points lower at 1,710.47 and moved between 1,699.94 and 1,712.32 throughout the trading session. Market breadth was negative, with decliners outnumbering gainers 560 to 481. A total of 608 counters were unchanged, 1,649 untraded, and 14 suspended. Turnover slipped to 3.29 billion units worth RM2.40 billion from 3.45 billion units worth RM3.79 billion on Friday.
China's central bank, the People's Bank of China (PBOC), reduced the one-year policy loan interest rate from 2.3% to 2%, while simultaneously withdrawing 291 billion yuan (US$41.4 billion) from the banking system through the medium-term lending facility (MLF). This marks the largest liquidity drainage since December 2021.
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These moves come as part of a broader stimulus package aimed at reviving China's slowing economy. On the previous day, PBOC Governor Pan Gongsheng announced a 30-basis-point rate cut and revealed plans to inject one trillion yuan in long-term liquidity by reducing the reserve requirement ratio (RRR) by 50 basis points, which lowers the amount of cash banks must keep in reserve.
The PBOC is transitioning away from using the MLF as a key policy tool, shifting towards shorter-term instruments like seven-day reverse repurchase notes. This shift is part of a new policy framework designed to influence market borrowing costs more effectively, aligning China’s approach with global practices.
According to Frances Cheung, a strategist at OCBC, there is potential for further replacement of MLF liquidity with RRR cuts, especially given the significant MLF maturities expected in the coming months. The rate cut also brings the MLF lending rate more in line with interbank funding costs, enhancing liquidity management in the financial system.o
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