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Shares slip as crude reverses gains on fading production cut hopes

KUALA LUMPUR (NewsRise) -- Malaysian shares fell and the ringgit tumbled to a two-week low Wednesday, as crude prices came under renewed pressure after major oil producers agreed to a conditional output freeze, falling short of market expectations of a production cut.

     The nation's benchmark FTSE Bursa Malaysia KLCI fell 0.04% to 1,664.32 points. The benchmark index has declined 1.7% in 2016.

     SapuraKencana Petroleum and Astro Malaysia Holdings led decliners on the KLCI Wednesday, while IOI Corp. and Axiata Group were the best performing stocks on the index.

     The ringgit fell 1.51% to 4.2125 against the dollar Wednesday, its lowest level since February 3 and chalking its worst single-session performance in over five months. For the year however, the currency is still 1.8% higher.

     Brent crude fell by 3.5% Tuesday, giving up the early gains chalked on expectations of an announcement of an outright production cut by major oil producers. After the meeting in Doha, Russia, Saudi Arabia, Qatar and Venezuela agreed to freeze production at January levels, on the condition that other producers agree to do the same.

     However, Iran, the Organization of Petroleum Exporting Countries' fourth-largest producer, continues on is plan to ramp up production to levels before 2011's sanctions, Mehdi Asali, Iran's OPEC envoy told Iranian newspapers Shargh on Wednesday. The benchmark Brent crude oil contract was last up 0.65% at $32.39 per barrel.

     In 2016, an accelerated slide in crude oil prices and weakening global growth outlook have driven a slump in risk assets across the world, with the MSCI All Country declining 9%. Global markets rebounded earlier this week as crude rallied off its lows and on expectations of additional stimulus from major central banks.

     In Southeast Asian markets Wednesday, Singapore's Straits Times and Thailand's SET index declined 1.19% and 0.3%. Philippine's PSE Composite and Indonesia's Jakarta Stock Exchange Composite advanced 0.19% and 0.43%.

     Among other Asian markets, Japan's Nikkei 225 index and Hong Kong's Hang Seng fell 1.36% and 1.03%, while China's Shanghai Composite index rose 1.1% and South Korea's KOSPI gained 0.18%.

     On the KLCI, 18 of the 30 constituents ended higher, while overall advancing issues outnumbered declining ones 440 to 402.

     "While regionally resilient, the KLCI still lacks near-term re-rating catalysts," said Vincent Khoo, an analyst at UOB-Kay Hian. "Current focus remains on quality dividend-yielding stocks, which should stage a more convincing outperformance in 2016."

     Foreign investors sold Malaysian shares worth 20.3 million ringgit ($4.9 million) Tuesday, according to BIMB Securities. Overseas investors have withdrawn 958 million ringgit from equity markets in 2016.

     SapuraKencana Petroleum, weighed by the overnight fall in crude, was among the worst performing stocks on the KLCI Wednesday, declining 3.06% to 1.9 ringgit.

     Astro Malaysia Holdings fell for the first time in five days, declining 2.55% to 2.68 ringgit. The television services provider advanced almost 6% in the previous four sessions.

     Petronas Chemicals and CIMB Group Holdings also snapped their recent rally, declining 3.06% to 6.96 ringgit and 2.49% to 4.31 ringgit. The integrated chemical producer and banking major had risen by 5% and 4% this week till Tuesday.

     DRB-Hicom fell 0.99% to 1 ringgit. Its unit Proton Holdings said Tuesday that it will recall about 100,000 to fix the oil cooler hoses.

     "We are positive on the exercise, as Proton ups its ante to improve its branding to the consumer," said Daniel Wong of Hong Leong Investment Bank. "Negative consumer perception on Proton's quality has been a major blow for the carmaker."

     Axiata Group rose 1.72% to 5.9 ringgit. Malaysia's biggest mobile operator by revenue on Wednesday reported a 22% slide in fourth-quarter profit to 467.2 million ringgit, but revenue rose over 11%. Its rivals Maxis and gained 1.31% to 6.18 ringgit and 1.63% to 4.99 ringgit.

     IOI Corporation rose 3.4% to 4.86 ringgit. The plantation and property developer, which reports its fiscal second quarter earnings on Friday, is regarded by analysts as one of the best proxy plays for a rally in crude palm oil prices on account of adverse El Nino effects.

     CPO prices for May delivery rose 0.5% to 2,600 ringgit per ton Wednesday. The prices have rallied 4.5% so far this year.

     Agriculture conglomerate PPB Group and Petronas Dagangan were the other notable gainers Wednesday, advancing 1.28% to 15.82 ringgit and 1.44% to 25.4 ringgit.

     Malaysia Airports Holdings rose 0.65% to 6.18 ringgit. The airport operator reported a net loss of 42.9 million ringgit for the October-December quarter, hurt by weakness at its Turkey operations.

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