Market drifts in cautious trading

KUALA LUMPUR: Market sentiment on the first trading day of May was weak. Bellwether indices in key regional markets were in negative territory throughout the trading day. Interest was also lackluster with markets in Japan and China closed for holidays. Investor confidence was, no doubt, shaken by the recent slew of negative developments.

For starters, the Dow Jones Industrial Average ended last week down 1.7%, snapping its record of eight straight weekly gains. News of possible criminal fraud charges against Goldman Sachs for its mortgage trading operations, on top of the earlier civil suit filed by the US Securities and Exchange Commission, gave investors another excuse to take some money off the table. There are fears that the charges will spur more stringent financial reforms, currently under debate by lawmakers.

Elsewhere, investors remain skeptical of a resolution to Europe's sovereign debt crisis in the near term. Greece won an expanded aid package from the European Union and the International Monetary Fund over the weekend, now totaling €110 billion (RM466.81 billion) over a three-year period. However, it remains to be seen if the country can sustain the painful austerity conditions attached to the bailout and if it can successfully pare borrowings under a negative gross domestic product growth outlook.

Last but not least, sentiment was further hurt after the People's Bank of China raised the reserve requirement ratio for banks by 50 basis points, for the third time this year. Recent measures by the Chinese government to mop up excess liquidity in the system and tamp runaway property prices are a harbinger of tighter monetary policy to come, including interest rate hikes.

Trading activities on the Bursa Malaysia was primarily focused on lower liner stocks while interest in blue chips was lackluster. The FBM KLCI closed marginally higher at 1,346.9 points, but market breadth was in the red throughout the trading day. Losing stocks outnumbered gaining ones by roughly nine to five at the close. Some 771 million shares changed hands.

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