Asian stock marts dive

Analysts and fund managers in Malaysia have mixed advice for investors: some suggest a disposal of stocks in any rally and others urge investors to hold on to their positions


Kuala Lumpur: Stock markets in Asia were a sea of red yesterday as investors panic-sold shares on fears that the US may go into another recession.

This followed rating agency Standard & Poor's move last Friday in downgrading the credit rating of the world's biggest economy for the first time ever, by one level to AA+.

Key markets in Asia, led by China, fell by between 3 per cent and 5 per cent in the morning, before calming down somewhat in the afternoon.

At home, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) plunged as much as 48.19 points (or 3.1 per cent) in the morning session to 1,476, with less than 30 of 1,000-odd counters posting gains.

It, however, gained some ground in the afternoon session, closing 27.44 points (1.8 per cent) lower to 1,496.99, its lowest in about five months. Some RM34 billion in market capitalisation was wiped out.

China's Shenzhen Composite Index (down 4.4 per cent lower to 1,113.37 points), Singapore's Straits Times Index (down 3.7 per cent to 2,884) and Korea's Kospi Index (down 3.8 per cent to 1,869.45) were among the worst performing indices in the region.

Analysts and fund managers here had mixed advice for investors, with some suggesting a disposal of stocks in any rally and others asking investors to hold on to their positions while waiting for greater clarity on the situation.

They expect Asian markets to take direction from Wall Street over the short term. Markets in US had yet to open for Monday trade as at press time, but key European markets were down by between one per cent and 2.5 per cent in early trade.

"It's a dynamic situation ... we have to watch Wall Street closely over the next few days," said Terence Wong, head of research at CIMB Research.

Wong noted that the pullback in the last two trading days, though strong, is still within a bull-market pullback.

"We don't think it's game over for the bulls yet. We're advising investors to hang on to their positions and seek greater clarity," he told Business Times.

Investors will also be looking for clues at a Federal Open Market Committee meeting in the US today.

"There could be added expectations for the policymakers to announce fresh economic stimulus initiatives, or at least prevent confidence from tanking further by spelling out contingency plans should the world's largest economy threaten to slip into a double-dip recession, while keeping interest rates low for an extended period," HwangDBS Vickers Research said in a note to clients yesterday.

The weaker fundamentals in the US and persistent debt worries in the eurozone are taking a toll on investor sentiment and causing investors globally to liquidate on any and every rebound rally in markets, analysts said.

"We believe the market concerns will continue to overwhelm sentiment, and the downshift in equities will persist," said Yap Huey Chiang of RHB Research Institute.

OSK Research cut its year-end target for the index to 1,557 from 1,680, and downgraded its recommendation on the Malaysian market to "neutral".

Other research houses, like CIMB, said they may follow suit after looking at the current slew of corporate earnings to come out.

"As of now, based on both technical and quantitative analyses, the downside risk is heightening," Kenanga Research said.

Maybank Investment Bank urged investors to dispose of stocks on any rally and keep more cash rather than equity.

"Any attempt to bargain hunt will be futile and shortlived. Therefore, any quick bargain hunting profits may quickly erode if clients do not take their positions off the table swiftly," its head of retail research Lee Cheng Hooi said in a note to clients yesterday.

Losers thumped gainers 67 to 1,051 losers, with 99 counters unchanged. Top gainers included Nestle (up 48 sen to RM47.60) and Shell (up 16 sen to RM10.28).

Some 1.9 billion shares worth RM3.6 billion changed hands in the market.