Malaysian shares closed down 0.14 percent on Tuesday after the government said the economy is expected to shrink by more than forecast this year, dealers said. The Kuala Lumpur Composite Index lost 1.51 points to 1,051.63, with losers outpacing advancers 399 to 266. The market was also hit by losses in plantation stocks and profit-taking on heavyweights.
"Sentiment changed markedly after lunch, with weaker CPO (crude palm oil) futures hitting plantations and (Second Finance Minister) Ahmad Husni Mohamad Hanadzlah saying the economy will contract by more than 1 percent for 2009," one dealer told Dow Jones Newswires. In March, the government warned the export-driven economy could contract by 1.0 percent this year despite a massive 16.2 billion dollar stimulus package, dumping its earlier target of 3.5 percent growth.
But Ahmad Husni said Tuesday that growth "will definitely be below minus 1.0 percent". His comments came after economists predicted Malaysia's economic contraction would be much more severe than the government had forecast. Official data showed Malaysia's economic growth slowed to just 0.1 percent in the fourth quarter of 2008, hit by falling exports and manufacturing.
Figures for the first quarter of 2009 are to be released on Wednesday. Among decliners, Malaysia Airlines was down 4.30 percent to 3.14 ringgit and KL Kepong lost 2.50 percent to 11.70. On the upside, Maybank rose 1.90 percent to 5.25 ringgit and BAT added 1.20 percent to 43.25.