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KLCI hit by US recession fears

©Business Times (Used by permission) by Francis Fernandez Before the new year, there were thoughts that the market could decouple from the US; it hasn't turned out to be true, says Aberdeen Asset Management SHARES slumped on Bursa Malaysia yesterday on heavy selling pressure as other markets around the world retreated amid fears of a US recession and global economic slowdown. The benchmark Kuala Lumpur Composite Index (KLCI) dropped sharply for the third time in as many trading days, dashing hopes that the domestic equity market would be able to decouple from broader markets in the US, Europe and Asia. "Before the new year, there were thoughts that the market could decouple from the US; it hasn't turned out to be true," said Gerald Ambrose from Aberdeen Asset Management. Decliners buried gainers by 14 to one, pushing the index down some 3.8 per cent, or 54.12 points, to end the day at 1,354, its lowest closing so far. Losers were across the board as fears of recession and systemic risks in the global financial market spooked investors. British American Tobacco Bhd was the biggest loser for the day, dropping RM1.50 to RM40.50 a share; followed by DiGi.Com Bhd, which fell RM1.40 to RM22.60. Plantation stocks and favourite heavyweights such as Malayan Banking Bhd (Maybank), Tenaga Nasional Bhd (TNB) and Gamuda Bhd also took a beating. Maybank and TNB each closed 40 sen lower to RM11.20 and RM8.95 respectively, while Gamuda fell 37 sen to RM4.68. Planters IOI Corp Bhd and Asiatic Development Bhd were not spared, falling 50 sen to RM7.35 and 60 sen to RM7.85 respectively. A local fund manager, who declined to be named, said the fundamentals of the domestic market were intact, but it would have to absorb structural downtrends in the US and China markets before it could find its footing. A fund manager at AmanahRaya-JMF Asset Management Sdn Bhd said it would be hard to decouple, and that risk levels had heightened across the board. "Even in the futures market, we are seeing volatility," he said. The KLCI futures contract for January went as low as 1,296 points before closing the day at 1,335. It opened the session at 1,345 points. In Singapore, the benchmark Straits Times Index fell as much as 5.8 per cent before recovering to close 1.73 per cent lower. Jakarta stocks went down 7.7 per cent to a near four-month low. In Japan, the Nikkei 225 lost 5.7 per cent in its biggest drop in a decade, while the Hang Seng index in Hong Kong fell 8.7 per cent. In India, trading on the Mumbai Stock Exchange was halted for an hour when the market fell 10 per cent within minutes of trading. Meanwhile, oil prices have also dropped on fears that a US recession would cut energy demand. The Brent crude fell US$1.08 (RM3.56) to US$86.43 (RM285.22) a barrel yesterday, while US crude was down US$1.01 (RM3.33) from US$87.68 (RM289.34) on Monday.