STOCK markets in Asia tumbled yesterday as investor sentiment was dampened by worries about the region's economic prospects in the face of the US dollar's continued weakness and Washington's move to impose import quotas on selected Chinese textile products.
Analysts said the broad-based price falls on Wall Street for a fourth consecutive trading day compounded the selling pressure in the region.
Share prices on the KLSE fell in tandem with the regional downtrend, although the greenback's softening was seen unlikely to pose a threat to Malaysia's export competitiveness.
The benchmark KLSE Composite Index (CI) slid 16.2 points or 2% to a six-week low of 766, with about 560 million shares traded.
Dealers said investors, including foreign fund managers, were trimming their positions ahead of the long Hari Raya break, which would start at the end of the week, and lack of fresh leads to trigger buying interest accelerated the fall in share prices.
OSK Research assistant general manager Pankaj Kumar said that events unfolding outside Malaysia had created uncertainty in the equity market. Furthermore, investors were generally not inclined to hold large positions during a long trading break as many things could happen during the period.
“It's better to be safe than sorry,'' he remarked.
TA Securities head of research C.K. Ngu said the CI's fall below the critical 780-point support level caused some panic selling yesterday.
The index has fallen 6% since the beginning of the month.
However, a research manager with a foreign broking house said the market's consolidation was a healthy one. “It will flush out the stale bulls and provide opportunities for bargain hunting,'' he said.
Elsewhere in the region, the South Korean market led the day's falls, with the Kospi 100 Index plunging 29.3 points or 3.65% to 772. In Tokyo, the Nikkei 225 slid 282 points or 2.9% to 9,615, while Bangkok's SET Index lost nearly 18 points or 2.8% to 619.
Hong Kong's Hang Seng dropped 154 points or 1.3% to 11,873, while across the causeway, the Straits Times Index fell 31 points or 1.8% to 1,677.
The strengthening of certain Asian currencies that are not pegged to the US dollar had sparked concerns that export growth in those countries would be affected as their products became relatively dearer, analysts said.
The US dollar has slid to a record low of US$1.1975 against the euro and a three-year low of 107.86 versus the Japanese yen.
In addition, analysts said, the investing community viewed the US government's controversial decision to slap import quotas on selected Chinese textile products negatively as it represented a step backwards for a country that had been preaching free trades to the world.
The import quotas, which will only come into force in three months, affect less than 5% of China's textile exports.
Nonetheless, many were worried that this could be just one of the many steps that the US would take to curb the import of Chinese goods, analysts said.
Consequently, this would be a speed bump for the robust economic growth in China which many neighbouring countries were increasing relying on for intra-Asia trade, said the head of research at a foreign stockbroking firm.
Looking ahead, Pankaj said the current market downtrend was an “excellent” time for long-term investors to accumulate stocks. But he added that one should also take note of the uncertainties surrounding the export picture in Asia as a result of the softening US dollar.
Some analysts said that investors might want to wait for the dust to settle before jumping into the market again because the downswing might last for a rather long period.
From the viewpoint of technical analysis, the market has entered into an oversold position and hence a technical rebound is imminent.
“Investors intending to ride on the technical rebound should have a 'stop loss' point in the event the market fails to sustain the rebound,'' said a technical analyst.
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