Asian marts skid on US auto woes

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KUALA LUMPUR: Key Asian markets skidded yesterday with losses of up to 4.7% while European markets were sharply lower, as investors turned cautious after a US task force rejected turnaround plans for automakers GM and Chrysler, suggesting that bankruptcy could be their best option.

On Wall Street, key indices also opened lower, with the Dow Jones Industrial Index slipping 2.78% or 216.25 points to 7,559.93 and the broader S&P 500 down 2.83% or 23.12 points to 792.82 at 9.37am EDT.

The US government, which took over the failing US auto industry, forced out General Motors Corp chief executive Rick Wagoner and pushed Chrysler LLC towards a merger, threatening bankruptcy for both.

The White House auto panel ordered Chrysler to form a partnership with Italian automaker Fiat within 30 days as a condition for receiving another round of much-needed government aid.

There were also fears that the Group of 20 meeting this week will fail to come up with a plan to revive the global economy.

Japan’s Nikkei 225 fell 390.89 points or 4.53% to 8,236.08, Hong Kong’s Hang Seng Index slid 4.7% to 13,456.33 and Singapore’s Straits Times Index lost 4.15% to 1,673.14.

The impact on Bursa Malaysia was less pronounced, with the Kuala Lumpur Composite Index (KLCI) shedding 1.82% or 16.09 points to 869.34.

Turnover was 363.79 million shares valued at RM600.72 million. Declining stocks beat advancers more than two to one, with 330 losers and 144 gainers.

Market capitalisation shrank by RM10.39 billion to RM652.97 billion from RM663.36 billion.

European markets opened sharply lower on March 30 with investors spooked by the tumble in Asian markets.

Light crude oil fell US$1.79 to US$50.59 (RM183.13) a barrel while crude palm oil futures for third-month delivery fell RM20 to RM1,970.

Maybank Investment Research head Vincent Khoo said the selloff in the equity markets was an excuse for investors to take profit after the strong run-up.

“The seizure (of the US market) was more or less expected as the US auto industry was in a structural decline. The markets had a fairly good run recently from the lows,” he said.

Khoo said the smooth transition of power from Prime Minister Datuk Seri Abdullah Ahmad Badawi to his deputy Datuk Seri Najib Razak would help reinforce market sentiment.

However, his concern was that external factors would continue to weigh down the local bourse.

AmResearch head Benny Chew said the market bounce started early this month due to higher global risk appetites when bond yields fell. However, the UK’s failed government bond auction last week, the first since 2002, was also of concern, he said.

Britain’s sale of 40-year government bonds last week only attracted a few bids for the £1.75 billion (RM9.06 billion) of gilts on offer, he said.

“The bear market rally has stalled,” said Chew about global equity markets.

Meanwhile, Maybank Investment, in its second-quarter outlook, said that sentiment would be eclipsed by global woes. Its year-end target for the KLCI was 900.

“Despite the government’s impressive and comprehensive RM60 billion second fiscal stimulus package, and amid rising hopes for stability in global banks and US consumption, the KLCI could eventually descend below 800 by 3Q09, as the global economic outlook darkens.

“Investor sentiment is still overshadowed by mounting losses at banks and investment banks globally (for example, deteriorating Eastern European economies will add to cumulative losses of some US$1.2 trillion since the crisis unfolded), rising consumer delinquencies and structural deleveraging in the US, and continuing cash call exercises around the world,” it added.

Tasek Corp Bhd fell the most, down 17.8% or 66 sen to RM3.04 while Nestle (M) gave up 50 sen to RM29, both on thin volume. Tanjong plc fell 40 sen to RM13.90.

Malayan Banking Bhd lost 26 sen to RM4.08, British American Tobacco (M) Bhd and MISC Bhd foreign 25 sen each to RM45.25 and RM8.20, and Malaysian Airports Holdings Bhd 21 sen to RM2.45.

Bursa Malaysia Bhd shed 19 sen to RM4.96 and TM International Bhd 17 sen to RM2.21.

Bumiputra-Commerce Holdings Bhd, which is giving its 36,000 employees the option to go on unpaid leave for up to six months to help cut costs during the economic slowdown, lost 15 sen to RM6.90.

Sime Darby Bhd, Malaysian Airline System Bhd and MISC Bhd lost 15 sen each to RM5.75, RM2.73 and RM8.30, respectively.

This article appeared in The Edge Financial Daily, March 31, 2009.