KUALA LUMPUR, Sept 8 (Bernama) -- Bursa Malaysia closed almost flat on Tuesday as buying interest rotated away from index heavyweights towards smaller-cap construction stocks, with sentiment affected by geopolitical uncertainty, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 0.39 of a point to 1,714.40 from Monday’s close of 1,714.79. The benchmark index opened 1.65 points lower at 1,713.14 and moved between 1,710.44 and 1,714.50 throughout the trading session. The broader market was almost evenly balanced, with decliners leading gainers 548 to 546, while 598 counters were unchanged, 1,107 were untraded and 25 were suspended. Turnover expanded to 4.13 billion units valued at RM3.14 billion from 3.60 billion units valued at RM2.45 billion on Monday.
Brazil's economy is growing faster than expected, with GDP expanding 3.3% in the second quarter, outpacing regional peers. However, Morgan Stanley strategist Nikolaj Lippmann cautions that this growth is bad news for Brazilian equities. The robust economic growth is being driven by increased fiscal spending, which is fueling inflation and prompting the central bank to maintain high interest rates, thereby weighing on the stock market.
Lippmann explained that Brazil’s growth is being fueled by debt, with the nominal budget deficit reaching 9.8% of GDP as of August and gross debt rising to 78.5% of GDP, up from 71.7% at the end of 2022. As a result, Brazil’s high debt levels are limiting investment in riskier assets like equities.
The central bank’s benchmark interest rate is expected to rise to 13.25% by July 2025, further discouraging stock market investments in favor of fixed income, which is offering double-digit returns. Foreign investors have also been withdrawing funds from local equities, with $5.8 billion pulled from the Brazilian stock market so far this year.
Despite the price-to-earnings ratio of local stocks rising to 9.86, it remains below pre-pandemic levels. Lippmann believes that any gains in stocks will be limited until the central bank signals an easing of interest rates, which would require fiscal responsibility from the government to manage spending and debt.
Lippmann remains overweight on Brazil, but favors foreign listings like Nu Holdings Ltd and MercadoLibre Inc over domestic stocks until the fiscal outlook improve
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