Malaysian Stocks May Resume Decline

(RTTNews) - The Malaysian stock market closed higher by less than a point on Tuesday, but that was enough to snap the six-day losing streak that had gripped the market and cost it more than 20 points or 2 percent. The Kuala Lumpur Composite Index remains under the critical support level of 1,000 points, and analysts don't expect the market to reclaim that mark on Wednesday.

The global forecast points to another sharply lower opening for the Asian markets, although the modest rebound experienced later in the session by some of the bourses on Tuesday may not materialize this time around. A grim economic outlook from the Fed chairman sent the U.S. markets into another tailspin, while uninspired corporate earnings from the financial sector added to the sharply negative sentiment.

The KLCI finished barely higher on Tuesday, lifted from sharp lows at the opening by a spate of bargain hunting. The financial sector finished sharply lower again, while the plantations also took a major hit - but those losses were offset by solid gains among the industrials.

For the day, the index ticked up 0.39 of a point of 0.04 percent to close at 997.23 after trading between 980.18 and 1,004.93. Volume was 457.575 million shares worth 942.548 million ringgit. There were 310 decliners and 249 gainers, with 229 stocks finishing unchanged.

Among the gainers, Telekom Malaysia rose 3.0 percent, Tenaga was up 4.6 percent and Bursa Malaysia added 1.6 percent, while KNM and Kinsteel also finished higher. Gamuda, Sime Darby and Maybank all finished flat, while Genting and IOI Corp wound up lower.

The news from Wall Street continues to be bad as stocks turned in another dismal performance on Tuesday amid lingering concerns about the health of the economy, adding to the steep losses posted in the previous session. While the Federal Reserve announced a measure to buy up massive amounts of commercial paper, investors remained skeptical that it would help inject liquidity into the markets.

Stocks saw initial strength after the Federal Reserve said that it would step into the commercial paper market in order to provide enough liquidity to help corporations properly manage their working capital, announcing the creation of a Commercial Paper Funding Facility. The facility will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers, providing what it calls a "liquidity backstop." Following the $700-billion financial relief plan aimed at easing pressure on financial institutions that Congress passed last week, the Commercial Paper Funding Facility will impact a wider variety of companies.

Federal Reserve Chairman Ben Bernanke also hinted Tuesday that the central bank might look to cut interest rates in the near future, a move that many experts have been pushing for in recent days to help protect the overall economy from the turmoil in the financial markets. In remarks to a business economics association, the Fed chief highlighted recent evidence that shows a growing threat of a further downturn in the economy and noted an improvement in the inflation outlook lately.

In other news, Bank of America (BAC | Quote | Chart | News | PowerRating) reported a 68 percent decline in its quarterly profit and slashed its dividend, sending financials lower. Later in the day, a rumor that Japan's Mitsubishi UFJ was pulling out of a deal to acquire a stake in Morgan Stanley (MS | Quote | Chart | News | PowerRating) added to the decline. While Morgan Stanly refuted the rumor and said that the deal would close on time, the stock still ended the session down 24.9 percent.

The major averages saw additional selling pressure in late day trading, ending the day at or near their worst intraday levels. The Dow and the S&P 500 set five-year closing lows, while the Nasdaq set a four-year closing low. The Dow closed down 508.39 points or 5.1 percent at 9,447.11, the Nasdaq closed down 108.08 points or 5.8 percent at 1,754.88 and the S&P 500 closed down 60.66 points or 5.7 percent at 996.23.

In economic news, Malaysia will on Wednesday release August numbers for imports, exports and trade balance. Imports are forecast to jump 13.9 percent on year, easing from the 14.8 percent annual gain in July. Exports are predicted higher by 16.5 percent on year, down from the 25.4 percent annual expansion in the previous month. The trade balance is expected to reflect a surplus of 14.29 billion ringgit, down from 14.51 billion ringgit a month earlier.

Also, Bank Negara Malaysia showed that its international reserves amounted to $109.7 billion as on September 30, the bank said on Tuesday, down from $119.1 billion recorded as on September 15. According to the official report, the reserve position is sufficient to finance nine months of retained imports and 4.1 times the short-term external debt. During the same period, the foreign currency reserves were at $104.5 billion, while other reserve assets amounted to $4.5 billion. Malaysia's SDR and reserve position with the International Monetary Fund stood at $0.2 billion each. Meanwhile, the gold reserves totaled to $0.3 billion.

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