Friday, August 5, 2011

Global markets routed

KUALA LUMPUR: Global markets were routed on Friday, Aug 5 as worries about another potential US recession and Europe's deepening debt crisis rattled investor confidence globally.

The fall was part prompted by the worst sell-off overnight on Wall Street since the global financial crisis in 2008, according to Reuters.

Investors were also bracing for US jobs data later in the day, a sensitive indicator at the best of times but a key gauge at the moment of the extent of the US economy's troubles, it said.

The FBM KLCI fell 1.45% or 22.46 points to 1,524.43 at 5pm, dragged by losses at banks and key blue chips. Week-on-week, the index lost 24.38 points.

At the regional markets, Taiwan's Taiex tumbled 5.58% to 7,853.13, Hong Kong's Hang Seng Index lost 4.29% to 20,946.14, Japan's Nikkei 225 down 3.72% to 9,299.88, South Korea's Kospi fell 3.70% to 1,943.75, the Shanghai Composite Index lost 2.15% to 2,626.42 and Singapore's Straits Times Index fell 3.61% to 2,994.78.

European markets were mostly mired in the red in early trade.

Commenting on the local bourse, MIDF Research head Zulkifli Hamzah said the severe retracement in the market today was not unexpected and was clearly a contagion effect from the turmoil on Wall Street.

He said the fall in prices today had been driven by aggressive selling by the foreign investors, adding that foreigners had been net sellers on the local market every day throughout this week.

However, he said that local support was still quite heavy, which explained why the decline in the FBM KLCI was not as severe as that experienced by other markets in the region, some of which fell by more than 5%.

'What is a bit disconcerting is that while foreign funds are exiting local equity, some are also leaving the shore.

'This is manifested by the sharp decline in the ringgit exchange rate against the greenback,' he said.

Zulkifli said he believed that investors are bracing for a prospect of a global double dip recession.

A cure to the global malaise in equity is likely to be in the form of QE3 (the third quantitative easing) in the US, since fiscal pump priming is out of the question there, he said.

'However, it could be a short-term panacea. Monetary easing has not had a sustainable impact on the real economy, and QE3 may be seen in similar light. Therefore, if policymakers in the US opted for QE3, the impact on the market may not be seen as long-lasting.

'At the end of the day, we need the real economy to breathe and respond to all the measures for the equity markets to come to life,' he said.

On Bursa Malaysia, United PLANTATION []s was the top loser and fell 98 sen to RM19.62; BAT fell 86 sen to RM45.42, Nestle lost 64 sen to RM47.13, Panasonic 38 sen to RM24, Batu Kawan 36 sen to RM16.20, Tradewinds 33 sen to RM9.05, while BLD Plantations, Dutch Lady and Genting lost 32 sen each to RM6.88, RM18.70 and RM10.46 respectively.

Among the banking stocks, RHB Capital fell 22 sen to RM9, HLFG lost 40 sen to RM12.70, Hong Leong Bank 30 sen to RM13.26, CIMB 11 sen to RM8.29, Public Bank 10 sen to RM13.14, AMMB nine sen to RM6.40 and Maybank eight sen to RM8.77.

Among the gainers, Tasek added 20 sen to RM8.50, Catcha Media 14 sen to 90, Atis eight sen to RM1.23, while UMS and Scomi Engineering added five sen each to RM1.73 and 87 sen.

Sanichi was the most actively traded counter with 66.25 million shares done. The stock fell 2 sen to 8.5 sen.

Other actives included Axiata, AirAsia, CIMB, Petronas Chemicals, DVM, UEM Land and MRCB.


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