This article first appeared in The Edge Financial Daily on December 27, 2018

KUALA LUMPUR: Most Asian markets, which resumed trading yesterday after a one-day Christmas break, were greeted by bears that seem to be gaining strength. But late bargain hunting helped pare some losses.

Christmas parties were also less cheerful in Asia as investors woke up to the continued sharp fall on Wall Street on Monday — the worst trading day on Christmas eve in history.

The Dow Jones Industrial Average slumped 1,067.4 points in two trading days — 414.23 points last Friday and 653.17 points on Monday.

The direction of Asian marts today will be largely dependent on the overnight closing in the US market on Boxing Day, said analysts.

Nonetheless, as equity routs are happening more rapidly than before, this reiterates the bearish outlook on the US and the global markets. An increasing number of investors tend to be convinced that the 10-year-old bull could be getting exhausted.

“We are likely at a very late stage of the equity bull market.

“We could be entering a period of relatively flat equity markets with periods of volatility depending on how the economy and corporate earnings [will be] during the initial months of the new year,” said Geoffrey Ng, investment adviser and director at Fortress Capital Asset Management (M) Sdn Bhd.

The slew of factors like the political uncertainty as a result of the shutdown of the US government, signals of higher US interest rates and the ongoing US-China trade war that is hurting global economic growth will continue to weigh on asset classes like equities and many commodities, Ng explained.

“We believe the current selldown is a combination of both concerns about the slowdown in the economy and corporate earnings leading to an excuse to dump shares,” he added.

Ng noted that the local bourse tends to take cues from external factors in the last week of the year.

On Bursa Malaysia, the benchmark FBM KLCI fell as much as 23.02 points, or 1.4%, to 1660.8 points, led by the over 3% decline in heavyweights Genting Bhd and Tenaga Nasional Bhd. It recouped some losses to close at 1,672.6 points, down 11.22 points, or 0.7%, yesterday.

No thanks to the soft crude oil prices, which dropped below the US$50 (RM209) level on Monday, the Bursa Malaysia Energy Index shed 1.31%, or 10.75 points, to 806.77 points. Meanwhile, the FBM Small Cap Index slid 107.80 points, or 0.93%, to close at 11,524.73 points.

Across the board, decliners outstripped gainers by 567 versus 208, while 318 counters finished unchanged yesterday.

With only three trading days left for 2018, Malacca Securities Sdn Bhd senior analyst Kenneth Leong forecasts that the KLCI would retest the two-year low of 1,630 points, before wrapping up the year between 1,630 points and 1,650 points.

Leong pointed out that although there could be a rebound in the now oversold US market as bargain hunting emerges on beaten-down stocks, any recovery would be minor.

Regional markets were mainly down yesterday, save for Japan. The Nikkei 225 recouped some lost ground, up 171.32 points, or 0.89%, after it tumbled 1,010.45 points, or 5%, on Tuesday and declared it had entered bear market.

Leading the fall yesterday, South Korea’s Kospi shed 1.31% to 2,028,01 points; Singapore’s Straits Times Index slipped 39.91 points, or 1.31%, to 3,011.15 points; the Jakarta Composite Index fell 0.58%, or 35.75 points, to 6,127.85 points. Bangkok’s SET Index was almost flat at 1,556.93 points, up slightly by 0.28 points.

Leong told The Edge Financial Daily the current selling pressure may persist into the new year, although he said it is too early to ascertain whether the end of the 10-year market rally is nigh.

“The weakness is likely to persist at least until the end of this week, or even the next. There are no other fresh local catalysts that could possibly drive the market upwards. We are not seeing a follow-through buying interest from the window-dressing activities in the past week or so, but rather, a continued selldown.

“However, I think it is still quite early to say that it is ending (the long stretch of bull run), at least for now. It (the rally) could last until the first quarter of 2019, but that being said, we should also monitor the next US-China bilateral meeting to see if the market would then recover, or tank, from its outcome,” said Leong.