Shares drop 1.7%, ignore Najib's plan

Malaysian shares snapped a two-day winning streak on Wednesday, paced by foreign selling of homegrown oil-and-gas services firm KNM Group Bhd and as confidence dipped after a senior US central banker said the world’s largest economy was now in a recession.

The local market also brushed off comments by Deputy Prime Minister and Finance Minister Najib Abdul Razak that he would unveil a ‘stabilisation’ plan containing additional measures to buffer the country against the worst of the global turmoil on Monday.

“Well, as I said the volatility is not over,” President of Malaysian Investors Association Dr PHS Lim told Malaysiakini. "Whatever measures that will be announced must be solid ones, otherwise it will be a waste of time."

“Not that I want to be alarmist, but maybe the worst hasn’t begun as far as the real economy and jobs are concerned. The possibility of huge layoffs in the US and the knock-on effects will echo across their economy and rebound on us in Asia.”

The benchmark Kuala Lumpur Composite Index dropped 1.7 percent to close the day at 949.88 points.

Foreigner Still Selling

KNM Group, which was the day’s top volume churner, saw a quarter of its market capitalisation wiped off. Popular with foreign fund managers, the stock was sold down in line with heavy investor redemptions taking place across the region. KNM shares closed at 69 sen, after tumbling 21.5 sen or 24 percent.

Malaysia has officially estimated economic growth at 5.7 percent for this year and 5.4 percent for next year. Economists widely expect the impact of the US recession to hit local shores the second quarter of 2009 onwards.

Elsewhere in Asia, Hong Kong shares plunged 5.0 percent, the Singapore Straits Times Index dived 4.1 percent, but the Nikkei-225 bucked the trend with a 1.1 percent gain.