By Lee Wei Lian
The Malaysian Insider
Aug 05, 2011

KUALA LUMPUR, Aug 5 — Today’s global market sell-off wiped an estimated RM26 billion from the KL stock exchange as investors took the cue from the regional meltdown following the rout on Wall Street yesterday.

Trader terminals were a sea of red today as losers vastly outnumbered gainers 934 to 60 while the broad-based Emas index shed 1.89 per cent to hit 10,478, a level not seen since May.

The benchmark FBMKLCI slipped 1.45 per cent to 1524, also its lowest level since May.

“If the Dow has another down day, things won’t look too good,” said Chris Eng, head of research at OSK Research.

One trader told The Malaysian Insider that the US jobs data report that was to be released today and was expected to see the unemployment rate in the world’s biggest economy remain unchanged, could send more jitters through the US market.

“Luckily we are off for the weekend,” he said.

The KL market has traditionally been seen as a defensive and “boring” market due to the dominance of government institutional funds, which causes a lack of liquidity.

This likely means that government-linked investment funds such as EPF and

PNB had a high exposure to today’s massive selldown.

Eng said that given the outlook for the global markets, any slight rebound from today would be an opportunity to sell.

All eyes will now be on August manufacturing data, traditionally a time when production picks up to cater for orders for the year-end holiday season.

If the August manufacturing data does not show an improvement over July, fund managers could be spooked into thinking the global economic recovery has stalled.

“If that happens, today’s tailspin is just the start of a possible bear market after three years of a stock market rally,” said the trader.

The Dow and the S&P index fell over 4 per cent yesterday due to recession fears in the United States and that Europe’s sovereign debt crisis could spread to Italy and Spain.

Asian markets were dragged down after panic set in due to the sell-off in the US.

Regional bourses were more badly hit, however, due to the defensive nature of the KL bourse.

About A$55 billion (RM173 billion) was wiped off the Sydney stock exchange, while Indonesia’s sharemarket fell 4.86 per cent, Singapore 3.61 per cent and Bangkok 2.73 per cent.

Northeast asian markets were also badly hit, with Shanghai down 2.2 per cent, Hong Kong 4.3 per cent, Japan 3.7 per cent, Taiwan 5.6 per cent and South Korea 3.7 per cent.

Reuters reported this evening that US$2.7 trillion (RM8.13 billion) was wiped off the value of world stocks this week.

After the sell-off today, the KL share market is down an estimated RM34 billion from Monday.