Wednesday, August 01, 2007

Ta Paw

Malaysian share prices took a dive at the close of trading Wednesday as the meltdown in the US subprime mortgage market sent shock waves through global markets, with local finance, property and mining stocks suffering the biggest losses.

Investors are concerned that problems within the US subprime mortgage market may have a wider implication than originally thought after Australia's Macquarie Bank Ltd said some of its funds faced large losses in the fallout from the crisis in the US subprime mortgage market

KLCI was down 34.22 points or 2.5 percent at 1,339.49, off a low of 1,327.71. Trading volume was a hefty 2.05 billion shares, valued at 3.36 billion ringgit.

The market's dive today is due to the ripple effect emanating from the subprime loans crisis in the US, which has spread to other countries like the UK and Australia.

The crisis will affect the credit outlook of many hedge funds, so there will be a sharp rise in risk premiums which will result in a sharp decrease in liquidity, and that would mean more pullbacks for the market in the immediate term.

A convincing close below the 1,350 level will not augur well for the local market's near-term outlook and trend in the local stock market will continue to be volatile in the coming months with the US sub-prime mortgage debacle gradually unfolding.

Investors are slowly realising the extent of its impact in the form of a credit crunch and higher risk premium on major asset classes.

KLCI strong support now is 1,315.

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