The KLSE Composite Index (CI) slipped back below the psychologically important 800-point level yesterday on sustained profit-taking in the market in tandem with the sharp pull-back in other major Asian bourses.
Dealers said the market's retreat was aggravated by selling by local funds, which are facing higher-than-expected redemption on their unit trust schemes.
The CI ended the day 5.68 points lower at 795.28, while the broader Emas Index fell 1.35 points to 198.18. The benchmark index slipped to as low as 790.8 in early afternoon, but managed to regain some lost ground towards the close thanks to last-minute buying.
A total of 689.1 million shares changed hands during the day, with losers overwhelming gainers by 637 to 203, while 188 counters closed unchanged.
Some fund managers, especially those managing bond funds, which have performed relatively poorly this year, have experienced higher-than-expected redemption, causing them to sell equities to raise cash, said a fund manager with a bank-backed asset management company.
Many investors in those funds had made early redemptions in view of the coming Hari Raya, he said.
The hiccup in the regional markets has also affected the local market sentiment and prompted investors, particularly retail players, to take profit, said TA Securities Sdn Bhd head of research Ngu Chie Kien.
SBB Securities senior analyst Ng Jun Sheng added that the overnight fall on Wall Street and the strengthening of regional currencies against the US dollar had dragged down the share prices of export-oriented companies in Asia.
Elsewhere in the region, Hong Kong's Hang Seng fell 153 points or 1.3% to 12,003, Tokyo's Nikkei 225 lost 297.5 points or 2.8% to 10,207, and Singapore's Straits Times Index shed 43.4 points or 2.5% to 1,699.
Bangkok's SET Index dropped 16.8 points or 2.5% to 647.5, the Jakarta Composite Index slipped 2.35 points to 618, while Seoul's Kospi Index lost 8.7 points or 1.1% to 769.6.
Fortress Capital Asset Management senior investment officer Michael Lai said most of the regional markets had also entered into a consolidation phase after making substantial gains recently.
Asian stock markets had benefited from an influx of foreign funds as the region was seen as the main growth engine for the global economy, he said.
Lai said many investors were now reviewing their investment portfolios after their earlier shopping spree, and were waiting for the release of corporate earnings figures this month.
Investors, he said, wanted to see if companies could actually deliver solid financial numbers to justify the rise in their share prices in recent months before building up their positions on equities again.
In general, analysts and fund managers concurred that the present market correction was a healthy development, and that the long-term prospects for the KLSE remained positive.
Ng of SBB Securities, noting that the correction in the CI was within 3% to 5% of its recent peak of 818 points, said: It is in line with our expectations.
He pegged 780785 as the floor for the benchmark index.
Ng expects the consolidation to end as early as next week to pave the way for the usual year-end window-dressing and also the listing of Khazanah Nasional Bhd's call warrants, MALAYSIAN BULK CARRIERS BHD and Idaman Unggul.
Hence, he said, the fall in share prices provided an opportunity for investors to buy on weakness.
Those who want to ride on the window-dressing trend could pick up blue chips or index-linked counters, Ng said.
Did you find this article insightful?