Black Friday for Asian bourses, KLCI down 3.6 pct

Malaysian shares plunged nearly four percent on Friday, as huge overnight losses on Wall Street triggered a domino effect in Asia.

The losses in New York, worst than those seen in the immediate aftermath of the Sept 11 attacks, have persuaded investors the string of of multi-billion dollar bailouts plus concerted interest rate cuts will do little to keep a full-blown global recession from occuring

“Everybody is talking about keeping cash. Everybody wants to sell,” said the head of research at a large bank-backed brokerage.

“So what we have is a narrow, narrow door with everyone rushing out at the same time trying to dump as fast as they can. Who would dare come out to buy at this time.”

At market close, the benchmark Kuala Lumpur Composite Index was down 3.6 percent to 934.01 points.

In New York, the Dow Jones Index had plummetted 7.33 percent last night, while the broader-based S&P Index lost 7.62 percent. The tech-laced Nasdaq dropped 5.47 percent.

Today, the falls across Asia were so severe that the president of the Indonesian stock market once again halted trading, only this time he said the suspension was for an indefinite period “to prevent deeper panic”.

In Japan, the Nikkei plunged 9.6 percent, Hong Kong shares dived nearly 8 percent, while the Singapore Straits Times Index sanked 7.8 percent.

Vicious Circle

Later tonight, finance ministers and central bankers from the Group of Seven industrialized nations will meet in Washington to discuss a way out of the banking holocaust, which has been exacerbated by fear of counter-party risk amid a widening vicious cycle of bankruptcies..

“Very frankly, I am not so sure they can achieve much,” Lee Heng Guie, chief economist at CIMB Bank, told Malaysiakini. “They have already tried various ways but it hasn’t worked.”

“Still, the first thing to do is to try to find a way to restore confidence. What is happening is that the pessimism is down-spiralling. Noone wants to lend anyone any money. Everyone is afraid of incurring bad debts. Obviously, this is making everything worst.”

Lee suggested one possibility was that policymakers issued guarantees as this could halt the worldwide panic and re-generate investor confidence.

“It really is no point flushing the international money markets with liquidity as they have been doing in the past. What is the point if nobody dares to lend out the money especially to those who need the funds the most to recapitalise.”

Meanwhile, another factor weighing on the Malaysian market is the uncertain political situation as Umno - the largest party - gears up for the election of top office bearers.

Prime Minister Abdullah Ahmad Badawi earlier this week had announced plans to step down next March, clearing the way for his deputy, Najib Abdul Razak, to move up the ladder.

Analysts have predicted the local market would continue to soften, unless there was a sharp reversal in the global trend. Some chartists believe the KL Composite may have to test the psychological 900 points before any reasonable technical rebound was possible.

“Investors would want to see what sort of economic reforms or plans that Abdullah’s successor would introduce before they return in any significant way,” said a dealer at a foreign securities house.

Meanwhile, market watchers are also keeping an eye on the 2009 Budget which is due to be debated on Monday when Parliament reconvenes.