Sunday, June 22, 2008; Posted: 05:54 PM
(RTTNews) - Shaking off persistent political concerns, the Malaysian stock market snapped its three-day losing streak on Friday after giving up more than 40 points or 3 percent. The market was able to re-claim support at 1,200 points - but now investors are bracing for a day of sharply lower trade when the Kuala Lumpur Composite Index opens on Monday.
Investors are likely to stay on the sidelines as Prime Minister Abdullah Ahmad Badawi will have to contend with an unprecedented no-confidence vote in Monday's parliamentary session. Abdullah is already battling to maintain control of his own party amidst plummeting public approval. The Sabah Progressive Party has said it will support a vote of no confidence and the party may pull out of the Barisan Nasional coalition, prompting other Sabah parties to do so as well.
The global market paints a generally gloomy picture for Asian bourses. There was more bad news out of the U.S. financial sector on Friday, which is expected to drag down banking stocks across the region on Monday. The price of oil rebounded to the upside after a sharp drop on Thursday, adding negative sentiment. Also, investors are likely to be cautious ahead of Tuesday's FOMC meeting as it is becoming increasingly likely that the Federal Reserve will hike interest rates before the year's end.
The KLCI finished modestly higher in thin trade on Friday after spending the entire session in positive territory. The plantation sector was up sharply, while the financial and industrial stocks also saw significant gains.
For the day, the index added 10.28 points or 0.86 percent to close at 1,206.67 after trading between 1,197.83 and 1,208.56. Volume was 450.714 million shares worth 1.154 billion ringgit. There were 385 gainers and 253 decliners, with 247 stocks remaining unchanged.
Among the gainers, BAT, Asiatic, IOI Corp, Genting, Resorts World, Sime Darby, Tenaga, Public Bank, TM International and Kuala Lumpur Kepong all finished higher. Bucking the trend, Maybank, Gamuda, DiGi, Nestle and MISC all wound up lower.
Wall Street provides a sharply negative lead after stocks ended Friday's session with significant losses as investors dealt with negative news within the financial sector. Analysts at Merrill Lynch reportedly slashed their earnings outlooks on several large regional banks, stating that they will have to cut dividends and continue to boost loss reserves. Additionally, Moody's Investor Services cut its ratings on Ambac Financial Group and MBIA, citing their impaired ability to raise capital and write new business.
While investors grappled with the credit crisis, they also had to deal with soaring energy prices. Oil closed higher, reclaiming some of its sharp loss from Thursday's session. Light sweet crude ended the day at $134.62 a barrel, up $2.69 on the session. Crude oil dropped $4.75 a barrel on Thursday after China said it would boost prices of retail gasoline and diesel prices, leading to speculation that demand could diminish.
The major averages ended the session with substantial losses, with the Dow closing below the physiological 12,000 mark for the first time since mid-March. The Dow closed own 220.40 points or 1.8 percent at 11,842.69, the Nasdaq closed down 55.97 points or 2.3 percent at 2,406.09 and the S&P 500 closed down 24.90 points or 1.9 percent at 1,317.93.
With the losses on Friday, the major averages all showed notable declines for the week. The Dow showed a 3.8 percent weekly decline, while the Nasdaq and the S&P 500 posted weekly losses of 2 percent and 3.1 percent, respectively.
In economic news, manufacturing sales in Malaysia increased by 18.5 percent on year in Malaysia, the government said over the weekend. Sales were 48.27 billion ringgit in April, and were down 0.1 percent from March on a seasonally unadjusted basis.
In corporate news, CIMB Bank will buy a 42.1 percent stake in BankThai for 5.9 billion baht and will launch a mandatory general offer for the shares it does not own, CIMB said on Friday. CIMB, the banking arm of Bumiputra-Commerce, also will initiate a capital restructuring of BankThai. That would bring the total cost of the deal to 1.9 billion ringgit from 577.4 million ringgit, the bank said.