Local bourse tumbles 20 points as foreigners exit market

PETALING JAYA: The local bourse ended another turbulent week of trade with the benchmark index shedding 19.93 points or 1.36% to 1,444.81 yesterday as investors pared their stakes in index-linked stocks following a slew of disappointing earnings and impending downgrades.

CIB Group Holdings Bhd, Genting Bhd and Petronas Chemicals Group Bhd were the top three losers. Financial stocks were among the main losers with Malayan Banking Bhd, Public Bank Bhd and Hong Leong Bank Bhd among the top 10 in the downtrend.

OSK Research Sdn Bhd director Chris Eng said in a preliminary roundup for the second quarter that while small cap stocks had already started to disappoint in the second quarter of last year, big caps had only started to disappoint from the last quarter of 2010.

He said that since then, both small and big caps had disappointed. “What we discover is not pretty with earnings continuing to slide and the big caps joining the small caps in both disappointments and downgrades,” Eng said.

He maintains a “neutral” call on the local market with a 2012 FBM KLCI fair value of 1,466 points based on 13 times price-to-earnings ratio but expects the earnings growth forecast of 12.8% to be cut in the coming days. Eng had downgraded the local market to “neutral” on Aug 8.

He said the equity markets had been extremely efficient in predicting the uncertain fundamentals globally by a large sell-off this month and this has peaked in Malaysia.

Meanwhile, with expectations of a third round of quantitative easing (QE3) still “up in the air” at press time (US Federal Reserve chairman Ben Bernanke would be giving a speech Friday morning New York time at a meeting of central bankers), Asian markets ended the week with range-bound trading yesterday.

European markets opened in the red while the Dow Jones and S&P 500 futures were marginally higher at 5pm. Spot gold advanced US$14.35 to US$1,788.80 per ounce and US Treasury yields fell on the uncertain global economic outlook.

Nymex crude oil retreated 34 cents to US$84.96 per barrel and crude palm oil for November delivery was RM20 lower at RM2,974 per tonne at 5pm.

Morgan Stanley Research analysts Gregory Peters, Neil McLeish, Gerard Minack and Jason Draho advised reducing risks in a report dated Aug 25 as market choppiness did not bode well for market direction from here.

They said any resilience in the equity markets would only be a temporary reprieve because of persistent concerns over credit.

“Weak markets have shifted the focus from a cyclical recovery to secular problems. While investors may have low expectations for QE3, they also haven't fully capitulated on the idea of a rally.”