Markets extend falls on growing external worries

Stock markets around the region extended their falls on Friday, Jan 29, spooked by another triple-digit overnight slump on Wall Street amid growing concerns over the pace of the economic recovery and a host of other external issues.

Shares on Bursa Malaysia fell today, but closed well off their intra-day lows. The FBM KLCI slumped 11 points at its lows, but recovered half of its losses to end 5.4 points down at 1,259.2. The key index has fallen every day this week, losing a total of 49 points in the last six trading days alone.

Market breadth was negative with declining stocks beating advancing ones by a two-to-one margin on volume of 973 million shares. Actively traded stocks include LCL Corp, Talam, Focus, Linear, KNM and Genting. Major gainers include Latitude, Top Glove and Public Bank. Losers include BAT, PPB and MISC.

Wall Street resumed its slide yesterday as disappointing forecasts from TECHNOLOGY [] companies and weaker-than-expected economic data brought renewed concerns about the US economy.

Last week’s new US jobless claims fell by 8,000 to 470,000 – but by a lower-than-expected margin – after posting a rise over two consecutive weeks. Most economists had expected a reading of around 450,000. This underscores concerns over the continued sluggish labour market.

Meanwhile, US durable goods orders rose 0.3% in December, following a revised a 0.4% decline in November. But this was short of the rise of 2% expected by economists. For 2009, durable-goods orders fell a significant 20.2%, the worst since data collection began in 1992.

The continued slump on Wall Street and growing US economic concerns add to a myriad of issues that have negatively affected investor sentiment over the past two weeks.

These include China’s credit tightening measures, the proposed new regulations for the US banking sector, the timing of interest rate increases, uncertainties over US Federal Reserve Chairman Ben Bernanke’s reappointment, among many others.

Now, concerns have also started to re-emerge on the European front, notably on the risk of defaults on Greece’s large debts, as well as that of other indebted nations such as Portugal. This in turn sent the euro to a six-month low of around US$1.40 to the US dollar.

These concerns come amid a backdrop of spectacular gains for global stock markets in 2009, with the FBM KLCI rising 45%. Thus, profit-taking activities are inevitable as investors lock in their earlier sizable gains and wait out the prevailing uncertainties.