Asian bourses pounded after record drop on Wall Street
PETALING JAYA: A reality check is taking place across global markets after a steep fall on Wall Street that saw it lose 4.6% on Monday.
The sharp u-turn over Friday and Monday on Wall Street wiped out gains seen from the start of the year and some feel there is still some way to go before the selling stops.
The Dow Jones Industrial Average reached an all-time high on Jan 26.
This was after having gained 25% in 2017 but the tailspin on Wall Street has put that market and most global markets into negative territory for this year.
The Dow was down 8.5% on Monday from its recent record high of Jan 26.
“Experts had been calling for a correction since the 25% rise and it looks like it could be coming to that, but that remains to be seen as sentiment is hard to gauge and trading could turn volatile,” a senior dealer remarked.
If the definition of a market correction by Wall Street is anything to go by, then US indexes like the Dow, the S&P 500 and most of the other global market benchmarks have yet to be in that territory – not until they have fallen at least 10% from their most recent peak.
The FBM KLCI, meanwhile, pared some of the day’s earlier losses to finish at 1,812 points yesterday, down 3% from its recent peak of 1,870 recorded just last week.
Tracking the trend in overseas markets, the local index has shaved off close to 60 points since Monday.
Some analysts believed that global economic fundamentals, supported by increasing corporate earnings and overall growth that has gained momentum, remained intact at this point, and the current sell-down presented selective buying opportunities.
“There is no clear sign of negative risks. To me, a couple of days of steep sell-down presents good buying opportunities,” Danny Wong, chief executive officer and fund manager of Areca Capital Sdn Bhd told StarBiz.
Wong is advising clients to “do nothing now” but to start topping up if there are further dips. “A 8% to 10% drop is healthy,” he added.
Still, others who advocate buying warn at the same time that there could be more substantial falls before markets start to rally again.
Yet, others are pointing out that global interest rates could rise faster than expected as economies continue to expand, which means that the cost of doing business will increase as with inflationary pressure.
“These are helping to spook and hurt the markets,” one analyst said.
Meanwhile, Permodalan Nasional Bhd chairman Tan Sri Abdul Wahid Omar expected the local bourse to continue rising, supported by corporate earnings and strong economic fundamentals.
He pointed out that the recent drop in the local stock market was triggered by the major selloff on Wall Street since last Friday, and did not reflect any fundamental shifts in the local market.
“As long as the Malaysian economy continues to improve and corporate earnings continue to grow with companies dishing out good dividends, we expect the stock market to rebound,” he told reporters at The Malaysia Leadership Succession Summit in Kuala Lumpur.
In the United States, experts said that stocks have run too much and too fast in tandem with President Donald Trump’s favourable promises of tax cuts and a glowing economy.
“This correction is a healthy development for the markets in the long run, and the equity bull market, while bloodied, is not broken,” Scott Minerd, global chief investment officer at Guggenheim Partners, was quoted as telling his clients.
Regionally, all the other markets which took their cue from the rout in the US ended yesterday in a sea of red, extending much of their Monday’s declines.
In Hong Kong, the Hang Seng skidded more than 5%, Japan’s Nikkei 225 finished over 4% lower, while China’s Shanghai Composite Index was down 3.35%.
At Bursa Malaysia, losers thumped gainers by a huge margin, with over 1,000 counters down while just over a hundred counters finished the day higher.
In the currency market, the ringgit was trading at 3.9165, 0.42% lower against the US dollar.
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