The sharp decline was in line with the performance of its regional peers, as foreign funds sold down on equities following the recent rally.
The Philippines led losses with a 5% decline while Jakarta's composite index shed 3% and Thailand lost 1.8%. Singapore's Straits Times Index slid 2%.
According to sources, Malaysia's negative performance could also be attributed to a rebalancing on the MSCI Index.
At 5pm, the key index dropped 44.88 points or 2.8% to 1,562.71 on the final day of the stock exchange's corporate earnings season.
Nineteen of the 30 KLCI-linked counters were in the red while eight gained and three were unchanged.
However, the broader market remained positive with 688 counters rising versus 563 falling.
Among the heavyweights, bank counters were the hardest-hit with Public Bank dropping RM1.20 to RM17.40, Maybank losing 39 sen to RM7.90 and CIMB dropping 20 sen to RM3.63
Petronas Chemicals slumped 44 sen to RM6.42 and Tenaga Nasional fell 64 sen to RM10.08.
In telcos, Axiata dropped 18 sen to RM3.55 followed by Maxis sliding 12 sen to RM4.90 and Digi falling 17 sen to RM4.
Top traded counters on the broader market were AT Systemization unchanged at 20 sen, YTL down 0.5 sen at 64.5 sen and Sapura Energy flat at 11.5 sen.
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