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No Relief Yet For Malaysia Stock Market

5/16/2012 8:03 PM ET

The Malaysia stock market has finished lower now in four straight trading days, giving away more than 50 points or 3.8 percent en route to a three-month closing low. The Kuala Lumpur Composite Index settled just above the 1,535-point plateau, and now analysts are predicting another soft start for the market at the opening of trade on Thursday.

The global forecast for the Asian markets remains negative, although they have taken heavy losses in recent sessions and are ripe for bargain hunting later in the day. The political situation in Greece remains the main culprit amid doubts regarding the country's international aid and rekindling worries that Greece could exit from the euro currency bloc. Providing support is better than expected U.S. economic data for industrial production and housing starts. The European and U.S. markets were lower again, and the Asian bourses are expected to open in similar fashion.

The KLCI finished sharply lower on Wednesday following heavy losses from the financial shares, industrial issues and plantation stocks.

For the day, the index dropped 25.03 points or 1.60 percent to finish at 1,536.04 after trading between 1,535.05 and 1,558.25. Volume was 1.33 billion shares worth 2.06 billion ringgit. There were 822 decliners and 97 gainers, with 215 stocks finishing unchanged.

Among the decliners, Maybank, Sime Darby, CIMB Group, AEON, BLD Plantation, Kuala Lumpur Kepong and Ariantec Global all finished lower.

The lead from Wall Street continues to be negative as stocks moved lower on Wednesday after failing to sustain an early upward move. The pullback came as worries about the political situation in Greece once again overshadowed a batch of upbeat U.S. economic data.

The downturn by the markets was partly due to reports indicating that the European Central Bank has stopped monetary policy operations with some Greek banks. A separate report cited two euro-area officials who said that the ECB has no plans to increase stimulus, adding to the selling pressure.

Stocks saw continued weakness following the release of the minutes of the Federal Reserve's April meeting, which showed that members of the Federal Open Market Committee remain divided on the prospects for a third round of quantitative easing. The minutes said "several" members are in favor of additional asset purchases if the economic recovery falters, up from "a few" potential advocates for QE3 a month earlier.

The early strength was due to some better than expected U.S. economic data, including a report from the Federal Reserve showing a much bigger than expected increase in industrial production in April. Output increased 1.1 percent in April, topping estimates for an increase of 0.5 percent.

Additionally, the Commerce Department reported that U.S. housing starts rose 2.6 percent to an annual rate of 717,000 in April from the revised March estimate of 699,000. Economists had expected housing starts to increase to 690,000 from the 654,000 originally reported for March. Also, building permits fell 7.0 percent to an annual rate of 715,000 in April from the revised March rate of 769,000.

The major averages all were near their worst levels of the day as the Dow slipped 33.45 points or 0.3 percent to finish at 12,598.55, while the NASDAQ fell 19.72 points or 0.7 percent to end at 2,874.04 and the S&P 500 dropped 5.86 points or 0.4 percent to 1,324.80. The losses extended a recent downward move by the major averages, with the Dow hitting a nearly four-month closing low, while the NASDAQ and the S&P 500 set new three-month lows.

by RTT Staff Writer

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