Malaysian shares closed sharply lower on Friday in line with an Asian selldown over fears the US subprime woes could develop into a global credit crisis, dealers said. The Kuala Lumpur Composite Index (KLCI) closed down 25.69 points, or 1.96 percent at 1,287.70, off a low of 1,275.70.
It held up relatively well compared to other regional bourses which plunged between three to four percent. For the week, the KLCI lost 49.83 points or 3.7 percent. Losers outpaced gainers 835 to 104, with 160 stocks unchanged. Trading volume was 1.059 billion shares, valued at 1.952 billion ringgit. Major central banks around the world Friday moved to pump additional liquidity into their respective money markets.
The European Central Bank announced a fresh cash injection into the eurozone banking market to address liquidity shortages amid growing fears about the US housing sector. On Thursday, the bank pumped a record 94.8 billion euros into the banking system in a move that spooked investors and sent stock markets tumbling world-wide.
The ECB's move prompted major banks is Asia to follow suit, with the Bank of Japan pumping one trillion yen into its local money markets, while in Australia, the Reserve Bank injected more than twice the average daily amount of funds into the banking system.
SJ Securities head of research Cheah King Yoong said he maintains his belief that the impact of the subprime crisis is limited and that it won't derail the US economy.
He also sees limited impact from the US subprime crisis on the local stock market. "Thanks to capital controls, our banks are not exposed to the US mortgage market. This sell-down is driven by sentiment, but fundamentally things have not changed," Cheah said.
Meanwhile, the local interbank market remained stable throughout the day despite interventions elsewhere in Japan and Australia. Dealers said there were no signs of support from Malaysia's central bank. "Our market is different as the ringgit is not (traded offshore) and this (has now become) a good thing at a time like this," a money market dealer at a local bank said.
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