Malaysian shares to extend fall as Wall St tumbles
KUALA LUMPUR, March 3 (Reuters) - Malaysian shares are expected to fall further on Tuesday after the Dow Jones Industrial average dipped below 7,000 points on fresh financial shocks.
"We expect more downside for the market, the main index will probably test the 850 points level," said a technical analyst from a bank-backed brokerage.
"Banks will again be the ones to take the hit and the selling is likely to spread to other sectors such as plantation stocks, which haven't seen any major selling yet," he added.
A dealer from another brokerage said local fund managers have increasingly switched into defensive companies with strong dividend yields such as Telekom Malaysia, Public Bank and Kuala Lumpur Kepong due to heightened downside risk to the economy.
The local bourse may still fare better than its regional peers, said the dealer.
"There has been very little foreign interest in our market, so the selling pressure may not be as great," he said.
Dow Finishes Below 7,000 for First Time Since '97
A relentless sell-off in the stock market Monday blew through barriers that would have been unthinkable just weeks ago, and investors warned there was no reason to believe buyers will return anytime soon.
The Dow Jones industrial average plummeted below 7,000 at the opening bell and kept driving lower all day, finishing at 6,763 — a loss of nearly 300 points. Each of the 30 stocks in the index lost value for the
Investors were worried anew about the stability of the financial system after insurer American International Group posted a staggering $62 billion loss for the fourth quarter, the biggest in U.S. corporate history — and accepted an expanded bailout from the government.
"As bad as things are, they can still get worse, and get a lot worse," said Bill Strazzullo, chief market strategist for Bell Curve Trading, who said he believes the Dow might fall to 5,000 and the S&P to 500.
This time around, Wall Street analysts seem to believe that a stock market recovery will first require signs of health among financial companies, and on Monday those signs seemed further away than ever.
While the root of the problem for the financial firms is the bad bets they made on mortgages and mortgage-backed securities, now the recession is exacerbating their problems, forcing job cuts.
"I don't think we find a bottom in the market until we see some sort of increased level of optimism and confidence among consumers and investors," said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.
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