KUALA LUMPUR, March 5 — “Insipid” fourth quarter results by Malaysian blue chips, a possible sovereign ratings downgrade and looming stimulus cut in the US have prompted analysts to urge a cautionary approach to local stock trading.

According to the Singapore’s Business Times, analysts from both AllianceDBS and RHB Investment expected downbeat performance to continue on the Malaysian bourse due to pressure from low oil price and the declining ringgit.

The business paper noted in particular the risk that state investor 1 Malaysia Development Bhd’s (1MDB) finances pose to Malaysian sovereign rating. 1MDB is wholly-owned by Malaysia’s Finance Ministry.

“A looming 6 per cent consumption tax has not helped sentiment. Neither has the continuing controversy surrounding 1MDB — the national strategic investment company that is saddled with RM42 billion in loans but insufficient cashflow to service its debts.

“Its enormous shadow on the banking sector could worsen investor sentiment. Ratings agency Fitch had warned of a possible sovereign downgrade at its next review in May even though S&P and Moody’s have seen little cause to change their ratings,” BT writer Pauline Ng wrote.

Malaysia also has not enjoyed the same recovery as the larger world economy, turning in a GDP growth of under 6 per cent last year.

The property sector has also been hit by tighter credit rules and a glut in prime locations such as Kuala Lumpur and Johor Baru, prompting investors to take their funds elsewhere.

The BT noted that the weak fourth quarter results for the auto, plantations, timber, media, logistics, rubber products and basic materials sectors stretch back two previous quarters, with only a few sectors that outperformed expectations.

“Still, AllianceDBS noted there were 1.5 disappointments for every one that beat estimates and that there had been twice as many earnings downgrades than upgrades. It has cut 2015 earnings by 1.5 per cent and anticipates earnings risk to remain high over the next quarter or two given weak domestic growth drivers,” the report added.

State oil firm Petronas posted a loss of RM9.9 billion ringgit in the fourth quarter of 2014, the first time it has ever booked a net loss, due to plunging oil price.

CIMB Group reported that profit for October-December fell to RM252 million from RM1.04 billion for the same period in 2013.