KUALA LUMPUR: Concern over the swine flu outbreak and the health of US banks continued to drag down the local and global markets.
Asian markets fell with Japan’s Nikkei 225 down 2.67% to 8,493.77 points, the Hang Seng Index losing 1.92% to 14,555.11 and the Singapore Straits Times Index slipping 0.56% to 1,808.41. Shanghai’s Composite Index dropped 0.16% to 2,401.44.
European markets were also notably weaker on the news flow, registering losses of between 1% and 3.95%.
At Bursa, after a three-week rally, the Kuala Lumpur Composite Index (KLCI) extended its losing streak from Monday, falling 14.42 points or 1.47% to 965.70. Total volume which had been hovering over two billion shares over the past two working days, dropped to 1.5 billion shares.
Crude palm oil futures fell RM25 to RM2,456 per tonne while light crude oil lost US$1.46 (RM5.26) to US$48.65 per barrel.
OSK Research head Chris Eng said while the research house was not downplaying the severity of the epidemic, the market itself was ripe for a correction.
“Investors had been looking for an excuse to take profit, and took their cue from the negative news flow,” said Eng.
He expected swine flu concerns to continue weighing on the markets.
“We see aviation and plantation stocks as the key losers in the event of a prolonged outbreak,” said Eng.
On the flipside, most analysts are expecting rubber glove manufacturers to benefit as demand for medical supplies is expected to soar.
Companies such as Top Glove Corp Bhd, Supermax Corp Bhd and Hartalega Holdings, to name a few, saw their share prices reach six-month highs before retreating as investors took profit.
The outbreak of swine flu in Mexico had spread to certain parts of the US, the UK, Canada and Spain. According to the World Health Organisation, 90 cases have been confirmed worldwide, and it was getting closer to an epidemic.
Economists in the US are warning that if the swine flu continues to spread, it would not derail a global economic recovery and prolong the current recession. The World Bank noted that pandemics in the 1950s and 1960s resulted in global gross domestic product (GDP) dropping by about 1%-2%.
Early results of the US government’s stress test on banks, which are due to be announced on May 4, revealed Bank of America and Citigroup may have to boost their capital.
The local market had been expected to pick up following Prime Minister Datuk Seri Najib Razak’s announcement of measures to liberalise the financial sector, by issuing new banking and insurance licences as well as relaxing the foreign ownership requirement.
“External factors, however, managed to dominate the market. And while this move (the financial sector liberalisation) is positive in the long run, in the short term people are concerned about how it will increase competition for the local banks,” said Eng.
He expected profit taking to continue for at least another day. “However, this will depend on how the US market performs today (Tuesday). Thursday will also be interesting as that is when Malayan Banking Bhd’s shares (from its rights issue) will be listed,” he added.
Genting Bhd fell the most, by 26 sen to RM4.34 with 12.85 million shares done. Johor Tin Bhd gave up 24.5 sen to 44.5 sen, Fima Corp Bhd was 18 sen lower to RM2.02 and Boustead Heavy Industries Corp Bhd lost 15 sen to RM2.99. Heavyweight Malayan Banking Bhd fell 16 sen to RM4.30.
Plantation stocks retreated from recent highs with IOI Corp Bhd and Batu Kawan Bhd falling 20 sen each to RM4.12 and RM8.05 while IJM Plantations Bhd shed 16 sen to RM2.32.