China leads regional markets lower

Written by Insider Asia
Tuesday, 25 August 2009 17:08

Share prices across Asia fell on Tuesday, Aug 25 dampened by a fall in China’s stock market. Chinese shares retreated again after their recent recovery as investors digested comments from Prime Minister Wen Jiabao that China faced new problems and Beijing will keep up its stimulus measures because the recovery lacked a solid foundation.

Volatility in the Chinese stock market has been a major factor influencing Asian bourses in recent weeks. The Shanghai Composite Index had fallen some 20% from its peak in early August on fears of overheating and credit tightening measures, after the government’s stimulus packages and aggressive bank lending boosted growth and asset prices.

China’s robust economic growth in 1H09 accounted for much of Asia’s relative resilience – when the US, Europe and Japan were mired in deep recession. But equally though, the rest of the world is also starting to recover from recession conditions, albeit slowly.

Shares on Bursa Malaysia traded broadly lower on Tuesday, with the FBM KLCI in the red the entire day. The index fell 3.4 points at the close, ending at 1,171.1. Market breadth was negative, with declining stocks outpacing advancing ones by a 3-to-2 ratio.

Investors continue to stay cautious, as evidenced by declining trading volume, which has fallen to below a billion shares per day over the past week. Trading on Tuesday totaled just 709 million shares. We believe investors are likely to stay cautious in the near term as the Chinese market will remain volatile, and investors will continue to assess the strength of the global recovery ahead.

Trading was dominated by mostly smaller cap stocks, with the notable exception of TM and PLUS. The top actives include Konsortium Transnasional, Multi Sports, KNM, Chuan Huat and Iris. Major gainers include Chuan Huat, Kamdar, LaFarge Cement, AEON, and Suncity. Losers include BAT, SP Setia, Tanjong plc and PPB.