RM26.3b market cap lost over 4 days

RM26.3b market cap lost over 4 days


Written by Surin Murugiah
Thursday, 20 May 2010 00:02


KUALA LUMPUR: A combination of weakness on Wall Street, the European debt crisis, worries of tighter financial regulation and negative news flow from one of the larger companies on Bursa Malaysia Securities drove the FBM KLCI to its steepest decline on May 19 since March 30, 2009.

The lingering uncertainty over the global economic well-being also resulted in the FBM KLCI losing 38.69 points over the last four trading days, and wiping off RM26.27 billion in overall market capitalisation on Bursa Securities.

On May 19, Asian markets fell while European indices, worried by the effectiveness of the measures adopted in Europe to arrest the debt crisis as well as Germany’s decision to ban naked short-selling on selected stocks, mostly opened lower.

At the close on May 19, Singapore’s Straits Times Index fell 2.45% to 2,774.54, Hong Kong’s Hang Seng Index lost 1.83% to 19,578.98, Japan’s Nikkei 225 fell 0.54% to 10,186.84, the South Korean Kospi fell 0.8% to 1,630.08, Taiwan’s Taiex Index fell 0.34% to 7,559.16, and the Shanghai Composite Index shed 0.27% to 2,587.81.

On the local front, the FBM KLCI declined for the fourth consecutive trading day and fell 1.65% or 21.94 points to 1,308.23, the biggest single day drop since March 30 last year when it fell 1.82%.

Trading volume was 781.53 million shares valued at RM1.4 billion. Losers thumped gainers by 689 to 135, while 175 counters traded unchanged.

Crude palm oil futures for the third month delivery fell RM10 per tonne to RM2,435 while crude oil fell US$1.14 (RM3.71) per barrel to US$68.27 as at 6.30pm.

The top eight laggards on the 30-stock FBM KLCI accounted for 16.52 points of the index’s decline, while PPB GROUP BHD [], whose 18.4% associate company Wilmar International’s Indonesian subsidiaries had been reported to be under probe for alleged unlawful value-added tax-restitution claims, saw RM1.21 billion erased from its market capitalisation.

PPB fell 5.79% or RM1.02 to RM16.60, the sharpest decline since Oct 24, 2008 when it fell 6.71%. Its market capitalisation fell to RM19.68 billion from RM20.89 billion.

Among the losers, IOI CORPORATION BHD [] fell 26 sen to RM5; CIMB Group Holdings Bhd 17 sen to RM7.04, PUBLIC BANK BHD [] 16 sen to RM11.78, AMMB HOLDINGS BHD [] 14 sen to RM4.86, GENTING BHD [] 12 sen to RM6.77, MALAYAN BANKING BHD [] nine sen to RM7.49, while SIME DARBY BHD [] lost eight sen to RM8.18.

Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi said fundamentals were not really that good, adding that stripping out inventory re-stocking (IRS), 8% out of Malaysia’s 1Q10 10.1% gross domestic product year-on-year growth was due to the IRS.

He pointed out the negative news flow, including Sime Darby’s cost overruns, the reports on Wilmar, as well as Wah Seong Corp’s Socotherm bid setback had affected market sentiment.

“Markets in the world are falling like nine-pins. Asia is down about 2.5% today. The FBM KLCI broke the 1,315 support level; this means we will see 1,300 very soon, maybe by May 20,’ he said, adding that markets might be turbulent for the next few months.

Lee said risks were high and rewards meagre, and advocated that investors sell most stocks and step aside, adding it was better to have more cash.

Inter-Pacific Research Sdn Bhd head Anthony Dass said the eurozone debt crisis would not leave Asia unscathed, and thus could force financial institutions to be more cautious in their lending, raise financial volatility in the financial market and hurt export demand.

“We fear the low interest–free environment in euro will feed into Asia, compounding liquidity issues that will flare asset prices. For countries like Malaysia, the widening fiscal gap may alleviate short-term pressure,” he said.

MIDF Research head Zulkifi Hamzah said it was difficult to quantify the extent to which local factors accounted for the lacklustre market condition now.

“The BN’s loss of its Sibu parliamentary seat may be unexpected, but political risk for Malaysia had been elevated since the last general election and swings in by-elections should no longer be surprising,” he said.

“Several instances of corporate misadventure such as Sime’s substantial provision and the latest being Wilmar’s predicament in Indonesia which affected PPB’s share price also contributed to the drag on the market.

“Otherwise, earnings for the quarter ended March are decent, with some significant surprises, especially that of Maybank,” he said.

However, he said putting things into perspective, the decline in FBM KLCI was nowhere near as severe as it had been made out to be.

“From the year’s high of 1,346.92, the FBM KLCI has given back less than 3%. If it is a correction, then it can be considered a healthy one and is an opportunity to accumulate.

“The fact remains that the strength of the ringgit reflects the fundamentals of the economy and the weak spots in the world today are in the West, and not Asia,” he said.

http://www.theedgemalaysia.com/business-news/166427-rm263b-market-cap-lost-over-4-days.html