KLCI Slides as Oil Surge and AI Spending Concerns Weigh on Market Sentiment

The FBM KLCI extended its decline on Wednesday, falling 9.00 points, or 0.52%, to close at 1,711.37 as investors turned cautious amid surging oil prices, escalating geopolitical tensions and uncertainty surrounding the outlook for artificial intelligence (AI) spending.

Market sentiment weakened with decliners outnumbering gainers 584 to 456, reflecting broad-based profit-taking across Bursa Malaysia. Financial Services, Healthcare and Consumer stocks led the losses, while Energy and Industrial Products bucked the trend.

The Energy sector gained 0.52% after Brent crude climbed above US$95 a barrel, its highest level in months, as consecutive US strikes on Iran fuelled concerns over supply disruptions and heightened inflation risks. Industrial Products also advanced 0.60%, supported by selective buying in export-oriented counters.

Oil Surge

Global markets were mixed as investors balanced strong corporate earnings against growing concerns over capital expenditure and inflation. The Dow Jones Industrial Average finished little changed, while the S&P 500 slipped 0.14% and the Nasdaq Composite lost 0.57%.

Although Alphabet reported better-than-expected quarterly results, its shares fell in after-hours trading after management unveiled higher capital expenditure plans, reviving concerns that technology giants are spending aggressively on AI infrastructure without immediate returns.

Investor caution intensified after a Goldman Sachs report highlighted that approximately US$489 billion of AI-related debt has been issued this year, raising questions over whether the industry’s investment pace can be sustained. The report weighed on major technology names, including Microsoft, Amazon and Meta Platforms.

In Europe, stronger energy prices lifted the FTSE 100 by 1.24%, while the STOXX Europe 600 added 0.58%. Asian markets were mixed, with Japan’s Nikkei 225 extending its recovery, while Hong Kong and South Korea ended lower.

Looking ahead, market attention remains focused on the earnings outlook from major US technology companies and the upcoming US Federal Reserve policy meeting. Investors are increasingly scrutinising AI-related capital spending, with markets showing a preference for earnings discipline rather than aggressive expansion.

Meanwhile, oil prices remain a key variable. Should Brent crude approach the US$100 mark, expectations for higher global inflation and a more hawkish Federal Reserve could intensify, potentially increasing volatility across global equity markets.

For Bursa Malaysia, analysts expect Energy stocks to remain the key beneficiaries of elevated crude prices, particularly upstream producers and oil and gas service providers. Technology counters, however, may continue to face pressure until greater clarity emerges on AI investment trends and corporate spending plans.

From a technical perspective, the FBM KLCI remains in a constructive consolidation phase despite the recent pullback. The benchmark index continues to trade above its 20-day, 120-day and 200-day moving averages, suggesting the broader uptrend remains intact. Immediate resistance is seen between 1,720 and 1,740, while key support lies in the 1,700-1,680 region. A sustained break above resistance could pave the way for a retest of the 1,760-1,770 zone.

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