KUALA LUMPUR: Stock prices on Bursa Malaysia traded sharply lower on Thursday, as investors and the public reacted in shock to the large fuel price increases.
Effective Thursday, petrol prices were hiked by 41% to RM2.70 per litre and diesel by 63% to RM2.58 per litre. Electricity rates are expected to be raised by 26% next month and plantation and IPPs companies will be levied with "windfall taxes".
While the public had earlier been forewarned of higher fuels costs week, many had expected this to take effect only in August, or at least on a more staggered pace. However, the magnitude of the latest increase is large. And indications that prices may be adjusted further on a monthly basis will likely create more uncertainty and tighten consumer spending.
The fuel hike will have far reaching effects on consumers and businesses already grappling with the effects of higher inflation and food costs, and thinner margins. It will reduce disposable incomes and affect consumer spending - and raise inflationary pressures further since fuel and electricity usage is prevalent across all products.
Thus, consumers can expect a broad range of price increases in the coming days. Margins for some companies may be crimped if not all cost increases are passed down.
It wasn't surprising therefore that investors reacted negatively, sending the KLCI down sharply right at the open. The benchmark index lost 29.6 points to close at 1,223.6 points. Declining stocks beat advancing ones by a roughly 3-to-1 ratio on volume of 623 million shares.
Sectors most directly affected by the moves were among the biggest losers, notably the plantations, IPP, consumer and motor sectors. Losers include BAT, KL Kepong, DiGi, Public Bank-foreign, Tanjong, Bumiputra-Commerce and Bumiputra-Commerce.
The day's most actively traded stocks include IOI Corp, Resorts World, AirAsia, Sime Darby, AMMB, Lion Industries and Gamuda. Gainers include AV Ventures, Bina Puri and Muda Jaya.
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