No Relief Yet For Malaysian Market

(RTTNews) - A day after snapping the two-day losing streak that had cost it more than 20 points or 0.24 percent, the Malaysian stock market turned right back to the downside on Tuesday. The Kuala Lumpur Composite Index surrendered support at 900 points, and analysts are calling it unlikely that the market will regain that level on Wednesday.

The Asian markets continue to lack much in the way of good news from the global forecast, which has investors continuing to fret over the likelihood of a deep worldwide recession. More bad news among quarterly earnings added additional negative sentiment, as did the continued weakness among the commodities. The U.S. markets finished sharply lower, and the Asian bourses are projected to follow suit.

The KLCI finished modestly lower on Tuesday, as profit takers ran up big losses among the financials stocks, the plantations and the industrial issues.

For the day, the index lost 9.64 points or 1.07 percent to close at 894.60. Volume was 1.081 billion shares worth 965.134 million ringgit. There were 367 decliners and 192 gainers, with 196 stocks finishing unchanged.

Among the actives, Scomi, MRCB, MISC, Public Bank, Maybank, Tenaga and IOI Corporation all finished lower. Sime Darby and Bumiputra-Commerce were both unchanged, while KNM Group and SAAG saw modest gains.

The lead from Wall Street is negative once again as stocks ended the session off their lows of the day but substantially below the unchanged line after briefly moving higher during mid-afternoon trading on Tuesday. The decline came as investors continued to see little evidence that the broader markets have found a bottom. Some disappointing corporate news, combined with falling commodity prices helped to drive trading.

In corporate news, a significant reduction in fourth quarter revenues for homebuilder Toll Brothers (TOL | Quote | Chart | News | PowerRating) led the company to decide that it would not release guidance for the coming year, citing the significant uncertainty surrounding the global economy. The failure to provide guidance resulted in a significant decline by Toll Brothers stock. Shares of Starbucks (SBUX | Quote | Chart | News | PowerRating) also posted a notable loss on the day after the company reported earnings after the close on Monday that dropped sharply year over year and fell short of analysts' estimates.

Meanwhile, continued weakness in the major commodities prices held the broader markets lower for most of the day. The price of oil showed a notable decline, closing down $3.08 at $59.33 a barrel, a 20-month closing low.

The recovery attempt in mid-afternoon trading came after the government the announced a streamlined loan modification program in order to assist homeowners facing foreclosure. Mortgages held by Fannie Mae (FNM | Quote | Chart | News | PowerRating) and Freddie Mac (FRE | Quote | Chart | News | PowerRating) are the focus of the initiative, which combines the efforts of several individual agencies.

The new guidelines allow borrowers who are at minimum three months behind on their home loans and owe over 90 percent on their home to qualify for an interest rate reduction. Their rates will be reduced to insure that the borrowers pay no more than 38 percent of their net income on housing-related expenses. Alternately, homeowners who meet the requirements will be allowed to extend the length of the mortgage from 30 to 40 years, reducing the monthly payment and deferring some of the principal interest-free.

Nonetheless, the major averages moved back to the downside going into the close, ending the day firmly in negative territory. The Dow closed down 176.58 points or 2 percent at 8,693.96, the Nasdaq closed down 35.84 points or 2.2 percent at 1,580.90 and the S&P 500 closed down 20.26 points or 2.2 percent at 898.95.

In economic news, Malaysia's industrial output declined in September, reversing the growth of August, a report by the Department of Statistics said Tuesday. Industrial output fell 1.7 percent year-on-year in September, in contrast to the revised 1.2 percent growth in August. Economists expected output to grow 0.6 percent. This was the first time industrial output declined after posting continuous growth for the last 17 months. The last time when industrial production declined was in March 2007, by 2.1 percent. All the three sub-indices, namely manufacturing, mining and electricity contributed to the contraction in September.

In corporate news, Malayan Banking (Maybank) saw first-quarter profits fall 22 percent on year, the company said on Tuesday, standing at 572.2 million ringgit versus 735.4 million ringgit a year ago. The net non-performing loan ratio strengthened to 1.84 percent from 1.92 percent in June 2008, while loan loss coverage improved to 100.2 percent in September. Net interest income was 3.6 percent lower, while non-interest income fell to 478.7 million ringgit from 610.2 million ringgit a year earlier.

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