Asian markets mired in the red on Europe, US debt worries

KUALA LUMPUR: Asian stock markets were mired in the red yesterday as a confluence of debt concerns in Europe and the US, as well as eight European banks failing the European Central Bank stress test, spooked investors.

The FBM KLCI fell below the 1,570-point level for the first time since June 28, particularly due to steep falls in CIMB Group Holdings Bhd and Tenaga Nasional Bhd.

CIMB, like other banking stocks was down following reports that the central bank of Indonesia could restrict foreign ownership in banks later this year. TNB shares came under pressure on expectations of weak 3Q earnings when it announces its results on Thursday.

The FBM KLCI fell 0.93% or 14.67 points to 1,562.56 as losers thumped gainers by 646 to 159 while 268 counters traded unchanged. Volume was 753.77 million shares valued at RM1.38 billion.

At the regional markets, the Hong Kong Hang Seng Index fell 0.32% to 21,804.75, the Shanghai Composite Index shed 0.12% to 2,816.69, Taiwan’s Taiex declined 0.42% to 8,538.57, South Korea’s Kospi lost 0.69% to 2,130.48 and Singapore’s Straits Times Index was down 0.17% to 3,078.95. Japan’s stock markets were closed for a national holiday.

Analysts said investors would be looking at external factors, including the US debt ceiling deadline review (on Aug 2) and the next Greek EU/IMF loan review (in September), as well as key corporate earnings over the coming week that include Goldman Sachs, Bank of America Merrill Lynch, Apple, GE and IBM.

Commenting on Bursa Malaysia, OSK Research director Chris Eng said the drop was likely due to foreign selling although it was mostly due to local factors.

“We are still expecting the market to recover by month’s end, although our earlier expectation for a strong July has been proven wrong thus far. The Malaysian market remains resilient due to the presence of large local and domestically focused institutional investors,” he told The Edge Financial Daily.

On any possible change in Indonesia’s banking ownership rule, Eng said it would have a bigger impact on CIMB than Malayan Banking Bhd given that CIMB Niaga contributes some 27% of CIMB Group’s pre-tax profit compared with Bank Internasional Indonesia’s less than 5% for Maybank.

Nonetheless we expect that the Indonesian government will schedule a gradual paring down rather than anything drastic as it will affect all of Indonesia’s more than 80 banks. As such, fears have been overblown on this, he said.

CIMB was actively traded and fell 19 sen to RM8.56 with 23 million shares done. Hong Leong Bank Bhd lost 16 sen to RM13.44, BIMB Holdings Bhd 13 sen to RM2.12, Hong Leong Financial Group Bhd eight sen to RM13.40, Maybank five sen to RM8.82, Public Bank Bhd four sen to RM13.34, AMMB Holdings Bhd and RHB Capital Bhd three sen each to RM6.37 and RM9, while Alliance Financial Group Bhd was down one sen to RM3.53.

TNB fell 22 sen to RM6.52 with 3.52 million shares done after CIMB Equities said in a report that its 3QFY11 ending August results were likely to miss its expectations but meet consensus forecasts.

Among plantations, Kuala Lumpur Kepong Bhd fell 20 sen to RM21.46, United Plantations Bhd 14 sen to RM20.02, IOI Corp Bhd seven sen to RM5.23, Sime Darby Bhd three sen to RM9.09 and PPB Group Bhd two sen to RM17.42.

Other decliners included Tradewinds (M) Bhd, Dutch Lady Milk Industries Bhd, Genting Bhd and Axiata Group Bhd.

DVM Technology Bhd was the most actively traded counter with 29.2 million shares done. The stock gained half a sen to 12.5 sen. Other actives included Hubline Bhd, CIMB, Axiata and Dialog Group Bhd.

Gainers included Sindora Bhd, CI Holdings Bhd, Eng Teknologi Holdings Bhd, Hartalega Holdings Bhd and KFC Holdings (M) Bhd.