THE Kuala Lumpur Composite Index shed 21.93 points yesterday to 813.44, closing lower for the third consecutive trading day, as markets around Asia experienced the biggest plunge in two-and-a-half years.
It was a bloodbath, Toh Hoon Chew, head of research at CIMB Securities said. The volume was not large, but there was just no support. It was one-way traffic all the way, with global funds selling and local funds reluctant to buy aggressively.
In Tokyo, the Nikkei 225 fell for the sixth day, closing at 10,884.70 points, down 554.12. In Hong Kong, the Hang Seng dropped 425.26 points to 11,485.50; in Seoul, the KOSPI shed 48.06 points to 790.68; and in Singapore, the Straits Times Index ended 51.94 points lower at 1,791.78.
Major global corporations, such as NTT DoCoMo Inc, Samsung Electronics and Kyocera Corp, all experienced sharp drops in their respective markets.
Analysts said the expectation that US interest rates would rise sooner rather than later now seems likely. Other factors for the weak market sentiment across the region were reports of China taking measures to cool its overheating economy, and rising crude oil prices.
An analyst with a securities house said, as the likely rise in US interest rates and the Chinese government's measures had already been factored into the recent decline in most markets, the threat of rising oil prices was more of a factor in precipitating the drop across regional markets.
If you look back to the 1970s, it was rising oil prices that led to the recession; and while I don't think this will happen again, it reflects the threat of rising oil prices to economic growth, especially in large markets like the US, which is the world's largest consumer of crude oil, the analyst said.
There appears to be some merit to this. According to a Reuters report, the world's top central bankers were meeting at the Bank for International Settlements to discuss the impact of rising commodity and oil prices on the global economy. Oil prices are at their highest levels in 13 years.
However, an analyst at OSK Research said the main reasons for the fall in all markets were US interest rates and the China factor. He agreed that rising oil prices might pose a problem, but believed the impact would be felt mainly in the transportation sector.
On Bursa Malaysia, stocks closed broadly lower across the board. Telekom Malaysia Berhad fell 45 sen to RM9.45, Malayan Banking Berhad 30 sen to RM10.20, Genting Bhd 70 sen to RM15.30, plantation stock IOI Corp Bhd 65 sen to RM8.80, semiconductor manufacturer Unisem (Malaysia) Bhd 35 sen to RM9.20, and Resorts World Bhd 40 sen to RM9.60.
Despite the falls, analysts said, the Malaysian stock market was still fundamentally attractive.
According to Toh of CIMB Securities, the selldown was overdone.
The market has a yield of slightly more than 3%, return on equity of 14%, earnings per share growth of approximately 20%, and is trading at 13 to 14 times PE 12 months forward. Fundamentally, the market looks pretty decent.
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