The Malaysian stock market on Monday wrote a finish to the three-day winning streak in which it gained more than 25 points or 3.5 percent along the way. The Kuala Lumpur Composite Index encountered stiff resistance at the 1,000-point plateau before pulling back, and now investing are bracing for mild weakness at the opening of trade on Tuesday.
The global forecast for the Asian markets is wrought with uncertainty as investors are increasingly nervous over the spread of swine flu, with travel and tourism stocks expected to remain under pressure - although pharmaceuticals are likely to continue to outperform. Some mixed news out of the corporate world adds to the overall negative sentiment. The European markets ended mixed but near the unchanged line, while the U.S. markets were solidly in the red - and the Asian bourses are tipped for little movement with a touch of downside.
The KLCI finished sharply lower on Monday, as investors locked in gains from last week's win streak. Financials were down sharply, while plantations eased more modestly and industrial ended barely below the unchanged line.
For the day, the index shed 12.56 points or 1.27 percent to close at 980.12 after trading between 974.90 and 996.60. Volume was 2.11 billion shares worth 1.41 billion ringgit. There were 508 decliners and 188 gainers, with 169 stocks finishing unchanged.
Among the decliners, AirAsia dropped 8.8 percent, Genting lost 5.7 percent and Maybank slid 0.9 percent, while IOI Corp, KNM Group, SAAG Consolidated, Sime Darby, Tenaga and Bumiputra-Commerce also ended in the red.
Wall Street offers a negative lead as stocks ultimately closed well below the unchanged line after seeing some uncertainty for most of Monday's trading session. The lower close came as traders expressed concerns about the economic impact of the swine flu outbreak
Analysts say that traders used the swine flu scare as an excuse to take some money off the table, but a full blown epidemic could lead to a 10 to 15 percent correction. Although the flu does seem to be spreading, many doctors agree that the swine flu is no more panic worthy than any other breakout of the human flu during flu season. President Barack Obama said Monday that the spreading swine flu is something that should raise the country's state of alert but should not be seen as a cause for alarm.
On the corporate front, Verizon (VZ) reported first quarter net income of $0.58 per share, compared to $0.57 per share in the year-ago period. Excluding special items, net income attributable to Verizon was $0.63 per share, compared to $0.61 per share in same quarter last year. On average, analysts expected the company to report earnings of $0.59 per share.
Meanwhile, Whirlpool Corp. (WHR) reported first quarter earnings of $0.91 per share, compared to $1.22 in the prior year quarter. The company reported net sales of $3.57 billion, down from $4.61 billion in the year-ago period.
In other news, auto giant General Motors (GM) said that it will cut 21,000 hourly jobs and reduce its U.S. dealer count by 42 percent by the end of 2010 under a revised viability plan. The company also plans to phase out its Pontiac brand and focus on its four core brands in the U.S.
The major averages all ended the day firmly in negative territory, although well off their lows for the session. The Dow closed down 51.29 points or 0.6 percent at 8,025.00, the NASDAQ closed down 14.88 points or 0.9 percent at 1,679.41 and the S&P 500 closed down 8.72 points or 1.0 percent at 857.51.
In economic news, Malaysian Prime Minister Najib Razak on Monday announced a liberalization plan for the financial services sector to attract foreign investment in the slowing economy. Measures include raising foreign equity participation in Islamic and investment banks and insurance companies to 70 percent from 49 percent. Accordingly, existing domestic Islamic banks are given greater flexibility to enter into strategic partnerships with foreign players through increased foreign equity.
But the foreign equity limit for domestic commercial banks will remain at the current 30 percent. Up to two Islamic banking licenses will be granted to foreign players to set up new Islamic banks with paid-up capital of at least US$1 billion this year. In 2009, two new commercial banking licenses will be offered to foreign players, and to a maximum of three in 2011.
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