Global markets take a beating again

KUALA LUMPUR: Global markets took another beating Thursday, with shares in Japan plummeting more than 11% as investors continued to dump shares amid heightening fears the global economy is sinking into a recession.

Japanese Prime Minister Taro Aso was quoted as telling Japanese lawmakers that the US government’s US$700bil banking rescue plan was “insufficient” and that was why “the market is again falling sharply.’’

Sentiment in Asia and Europe was gutted by the 7.9% dive on the Dow Jones Industrial Index on Wednesday on fears the US economy was headed for a recession after Federal Reserve chairman Ben Bernanke said the US economy faced a “significant threat” from credit markets.

Crude oil dropped US$4.09 to settle at US$74.54 on Wednesday, the lowest closing level since Aug 31, 2007 as fears of a sharp fall in demand took grip.

Japan’s Nikkei 225 plummeted 11.4% to 8,458.45 points yesterday, the index’s steepest one-day loss since 1987.

European markets slumped 2% to 3% in early trade.

In South Korea, the main Kospi index plunged 9.4% after rating agency Standard & Poor’s warned that Korean banks might struggle to refinance their debts.

Stock markets in Hong Kong, China and Singapore fell between 4.2% and 5.2%, while in Australia, share prices tumbled 6.7%.

On Bursa Malaysia, the KL Composite Index fell 29.86 points, or 3.1% to 920 points.

Shares in oil and gas fabricator KNM Group Bhd again dominated trade on Bursa Malaysia, with 342 million shares transacted.

The counter alone accounted for about 38% of total market volume of 897 million shares yesterday. (See report on B3)

The ringgit, meanwhile, slumped to a new 21-month low at 3.5265 against the US dollar.

OSK Research has lowered its year-end target for the KL Composite Index (KLCI) for a second time in a month, citing “worsening global economic outlook and falling commodity prices.’’

The firm slashed its year-end target for the KLCI to 1,037 points from 1,128 points and to just 1,116 points for 2009.

“With sentiment badly beaten as it is, even the easing political uncertainties and the unveiling of a domestic ‘stabilisation’ plan may not be enough to significantly lift our market,’’ OSK said.

The Government is expected to announce on Monday details of its stabilisation plan, which would contain measures to help the economy withstand the global financial crisis.

The financial crisis and its crippling impact on the global economy had already ravaged commodity markets, with crude oil, crude palm oil (CPO) and steel prices plunging from record highs just months before.

CPO third month futures contract traded on Bursa Derivatives, the global benchmark for the vegetable oil, tumbled 5.3% to a new two-year low of RM1,651 per tonne yesterday.

CIMB Research noted that steel product prices had fallen 30% to 50% from their peak in July.

“In a nutshell, the landscape for the steel industry has changed and is expected to be negative for the next six to 12 months, given the recent downgrades of key demand drivers for the steel,’’ it said.

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