Investors scurry for cover after US stock sell-off on Wednesday

By NG MIN SHEN / Graphic By TMR

Equity markets across the globe tumbled, in some countries to multiyear lows, and billions of market capitalisation evaporated as investors scurried for cover after one of the biggest US stock sell-offs in recent months.

The Dow Jones Industrial Average, which fell more than 800 points on Wednesday, dragged markets across Asia and Europe yesterday as investors fretted of further market earthquakes.

The Shanghai Index shed 5.22% at the close yesterday, Hong Kong’s Hang Seng Index erased 3.54% or 926.7 points, while Japan’s Nikkei 225 trimmed 1,047 points during early trade before closing 3.89% or 915.18 points lower at 22,590.86 points. The drop in Nikkei hit investors hard after it reached a 27-year high on Oct 1.

Other markets in Asia and Europe were also a sea of red as worries over rising US interest rates and a global economic slowdown heightened.

Europe’s main markets dropped in early trading, but less severe than its Asian counterparts. London’s FTSE 100 was off 1.38% in early trade, while Germany’s DAX was lower by 0.74%.

Malaysia’s share market felt the Dow’s tremors, shedding more than 40 points to a low of 1,682.98 during yesterday’s morning session.

Bargain hunters snapped indexlinked counters punished in the last two days and helped the FTSE Bursa Malaysia KLCI (FBM KLCI) to recover some lost ground. The market closed yesterday’s session 1.54% or 26.69 points lower at 1,708.49 points.

The meltdown in recent days, however, pushed Public Bank Bhd to become the second-most valuable counter on the local stock market.

Besides Dow’s nearly 832- point fall, the third-worst point decline in history, the S&P 500 shed 3.3% or 95 points, while the Nasdaq lost 4.1% or 316 points, its worst performance in seven years.

US investors were spooked by climbing interest rates and fears of another rate hike by year-end, besides news that corporate earnings would be hit by the trade war with China. US Treasury notes’ climb did little to help calm the market.

AmInvestment Bank Bhd executive VP and head of equity markets Gan Khim Khoon said investors’ sentiment was dampened by both external and domestic factors, with a contagion effect spreading from global markets.

“All markets are facing the same issues of rising US interest rates and the US-China trade war.

“The US markets also have had a very good run, so some investors are using this uncertainty as an excuse for profittaking. The Chinese markets also saw a heavy sell-down, partly due to investors playing catch-up after the long Chinese holiday last week,” he told The Malaysian Reserve.

He said the local market had an added factor — the government’s warnings on spending and the upcoming budget.

“There have been hints of a painful upcoming budget, which could tip the balance towards a sell-first attitude,” he added.

The FBM KLCI extended a five-day consecutive decline yesterday with losers outpacing gainers 993 to 116.

The local market shed 2.2% on Wednesday after Prime Minister Tun Dr Mahathir Mohamad announced that the government could introduce new taxes to pay off its over RM1 trillion debt.

Budget 2019, which is scheduled to be tabled on Nov 2, is expected to be leaner.

Construction stocks have been badly hit after the government cancelled or delayed several infrastructure projects, while telecommunications companies have to comply with the ruling mandate to provide cheaper and faster broadband.

However, Gan does not expect the sell-down to persist. “I don’t think the sell-down will continue for long. It does not necessarily mean the start of a bear market. Those stocks that have particular reasons may continue to suffer, but for others, there’s no reason for a continuing drop, other than general sentiment and global markets falling,” Gan said.

Public Bank, which was founded by tycoon Tan Sri Dr Teh Hong Piow, is now valued at RM96.67 billion based on its market capitalisation, RM4.73 billion short of becoming the largest company on Bursa Malaysia.

Malayan Banking Bhd, the largest company on the stock market, has a market capitalisation of RM101.4 billion.

Public Bank replaced Tenaga Nasional Bhd (TNB) as the second-biggest counter based on market capitalisation.

TNB’s stock price lost 7.15% of its value in the last two trading sessions. The shares closed 2.72% or 40 sen lower at RM14.28 yesterday, valuing the company at RM81.08 billion.