Business

Thursday February 7, 2008

Asian stocks take a beating

By IZWAN IDRIS




izwan@thestar.com.my

PETALING JAYA: Asian stocks suffered heavy losses yesterday after Wall Street’s steep drop overnight battered sentiment across the region and reinforced views that the US – the main market for Asia’s export-driven economies – is already in recession.

Investors were also wary about holding shares in a volatile market over an extended weekend.

In Hong Kong, the benchmark Hang Seng index plunged 5.4% yesterday to 23,469 points during a shortened trading session ahead of the Chinese Lunar New Year holidays, while in Japan, the Nikkei 225 index skidded 4.7% to close at 13,099 points.

At home, the KL Composite Index fell 16.41 points, or 1.15%, to 1,415.94 as volume shrank to 512 million shares worth RM1.31bil from 834 million shares valued at RM1.88bil previously.

It was the slowest trading day on Bursa Malaysia in more than a year.

“Most investors prefer to stay out ahead of the long holidays,” a dealer at local brokerage commented on the sharp decline in trading volume yesterday.

The selling pressure on local shares, while not as furious as seen in Hong Kong or Japan yesterday, brought down prices of stocks across the board.

Even plantation plays were not spared, despite rising crude palm oil (CPO) prices on Bursa Derivatives yesterday.

The benchmark three-month CPO futures contract extended gains to six days in a row, to close 1% higher yesterday at RM3,385 per tonne. It hit an intra-day record of RM3,458 per tonne on Tuesday.

However, shares in Kuala Lumpur Kepong Bhd dropped 50 sen to RM17.90 yesterday, IOI Corp Bhd was down 15 sen to RM7.60, and Sime Darby Bhd was off 10 sen to RM11.90.

Palm oil prices have risen 76% over the past one year, and these companies are likely to continue to enjoy bumper earnings on higher selling price amid rising demand in the international market.

But stock trading sentiment across Asia yesterday was weighed down by the latest disappointment coming out from the US.

A surprise contraction of the US service industries index in January, according to figures released by the Institute for Supply Management on Tuesday, pulled the Dow Jones Industrial index 370 points, or 2.9%, lower to 12,265 points in overnight trade.

The last time the index dropped below 50, which signals a contraction, was in October 2001 when the US was in recession. About two-thirds of the US economy is made of the service industries, which include financial and information technology sectors.

With the long holidays ahead, most investors may have opted to cash out on their investment rather than leaving themselves exposed to risk of further meltdowns.

Most bourses in the region, except those in Japan, Thailand and India, will only resume trade on Monday.

Stock markets in South Korea, China, Taiwan and Vietnam were already closed yesterday, while Hong Kong, Singapore, Malaysia and Indonesia are closed for a four-day weekend.

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