Investors turn cautious

Wednesday, 19 August 2009 18:19

Shares in key Asian markets traded rather erratically on Wednesday, Aug 19. Sentiment started on a firmly footing following gains on Wall Street overnight. Whilst there was no major rush into stocks, most bellwether indices in the region edged higher in the earlier part of the day. However, sentiment took a turn for the worse as the day progressed.

In particular, the sharp pullback in China stocks in the afternoon sent shockwaves across the region. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dipped 4.3% for the day. The index is now some 20% off its year-high, from little over two weeks ago.

Chinese shares have been among the world’s best performers this year, driven by expectations that the country’s economy will fare better than the rest of the world. Indeed, its economic growth picked up momentum in 2Q09, boosted by massive government stimulus and record bank lending.

However, there are growing concerns that some of the lending had gone into non-productive sectors, such as property and equity. Worries that the government will try to rein in bank lending contributed to the current pullback in the stock market.Asian stock markets ended the day mostly lower.

On the local bourse, the FBM KLCI opened in positive territory but slipped into the red soon after. Selling pressure increased after the mid-day break. Investors took money off the table in view of the increased uncertainty in world stocks after the recent rally.The benchmark index closed nearly nine points lower at 1,155.5. Market breadth was also negative.

At the close, there were roughly seven losing stocks for every two gaining ones. Some of the big losers include Tanjong plc, KL Kepong and Top Glove.Market volume contracted to about 875 million shares. Multi Sports Holdings, the second foreign company to list on the Bursa Malaysia, was, by far, the most actively traded counter for the day. The stock ended 8.5 sen lower at 76.5 sen from its initial public offering price of 85 sen.