KUALA LUMPUR: The FBM KLCI experienced a sharp decline on Wednesday on fears that Malaysian bonds would be dropped from the FTSE World Government Bond Index.

FTSE Russell has placed local government bonds on the watch list for six months following a review, raising concerns that an exclusion could trigger a ratings downgrade.

The ringgit saw selling pressure from the news, losing 0.5% against the US dollar in the previous session. At midday on Wednesday, the currency was down 0.3% against the greenback at 4.1435.

It also fell 0.1% against the pound sterling at 5.4116 and 0.35% against the Singapore dollar at 3.0602.

At 12.30pm, the FBM KLCI was down 12.68 points to 1,616.78. Trading volume was 1.82 billion shares valued at RM845.79mil. Decliners overwhelmed advancers 636 to 135 and 302 counters were unchanged.

Twenty-two of the KLCI-linked counters slid into the red in the morning session, led by bank and telco stocks.

Maybank lost 15 sen to RM9.06 while Public Bank fell 12 sen to RM22.48, CIMB slipped three sen to RM5.02 and Hong Leong Bank slid 12 sen to RM19.96.

Among telcos, Maxis fell nine sen to RM5.47 and Axiata dropped seven sen to RM4.11.

Top traded stocks on Bursa Malaysia included Sapura Energy slipping one sen to 32 sen, Daya trading unchanged at one sen and Bio Osma losing 0.5 sen to seven sen.

Elsewhere in the region, markets were mostly lower despite China's better-than-expected Q1 GDP growth of 6.4%. 

The Shanghai Composite Index stayed mostly flat while the CSI300 Index lost 0.3% and Hong Kong's Hang Seng dropped 0.2% 

Japan's Nikkei Index rose 0.3% while South Korea's Kospi Index was flat.

Meanwhile, oil prices continues to rise as Chinese refineries showed strong demand while US supply dropped unexpectedly.

US crude rose 40 cents to US$64.45 a barrel while Brent crude gained 24 cents to US$71.96 a barrel.