KLCI below 900 points

By YEOW POOI LING
Asian shares weaker for second day and fall to four-year lows

PETALING JAYA: The KL Composite Index (KLCI) closed below 900 points for the first time since June 2006, as the global financial crisis deepened in various parts of Asia.

Asian shares were also weaker for the second consecutive day this week, falling to their lowest levels in four years.

Yesterday, the New Zealand central bank announced rate cut by 100 basis points to 6.5% while Japan reported export data that missed estimates, signalling poorer demand from its major trade partners.

This week, the yen appreciated by 4% against the US dollar, indicating further unwinding of assets and redemption of funds.

The KLCI closed down 13 points to 891.3 while Kospi plunged 7.5%, Nikkei 225 lost 2.5%, Hang Seng Index dropped 3.6% and the Straits Times Index fell 4.1%.

According to StarBiz technical chartist K.M. LEE, the KLCI’s intraday low of 881 was its worst since June 2005 but bargain hunting on selected blue chips helped it recover some of the losses.

Technically, the prevailing trend was clearly bearish but, given the oversold position, a relief rebound might be around the corner, he said, adding that the immediate upside potential was likely to be capped at the 14-day simple moving average, resting at 941 points and still falling.

Aseambankers head of retail research Lee Cheng Hooi estimated that the next support level for the benchmark index was at 880, followed by 859 and 802.

He said Valuecap Sdn Bhd, the state-owned asset management company, was likely to start buying around the 859 level with the promised injection of RM5bil from the Government.

The anticipated multiplier effect, however, may be muted as buying support is likely in bigger-capped stocks while second and lower liners will still be shunned.

Lee said the net outflow since the second half of last year to the first half of 2008 was estimated at about RM46bil.

Credit Suisse Asia chief economist Joseph Tan said the impact of the financial crisis on the real economy was slowly unfolding with rising unemployment rate in the US and falling prices of goods.

Holiday travel was also slowing down and Asian exports were seeing poorer performances, he said.

Nevertheless, Asia would be more resilient to weather the tough times ahead, thanks to higher savings rates with banks having a relatively wider deposit base, Tan added.

An analyst at fundsupermart.com said while export growth to the US and Europe would deteriorate as indicated in data from China and South Korea, Asian consumption, especially from China and India, was expected to take the lead to sustain intra-regional trade.

She also noted positive signs, like the easing of tightness in the credit market over the past week and concerted efforts by governments to tackle the financial challenges, including guaranteeing deposits, interbank lending and capital injections into the system.

“We believe once the interbank rate returns to normal and when market sentiment starts to recover, monies will flow into Asia again, as valuation remains the most attractive across the world,” she added.