Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Friday, February 11, 2011

KL stock market takes a beating

The Malaysian stock market fell by more than 2 per cent yesterday, its biggest decline since October 2008, mainly driven by heavy selling from foreign funds.

The benchmark FTSE Bursa Malaysia KLCI index closed 2.09 per cent lower at 1,503.99 points yesterday.

"This is the real McCoy. Foreign funds are flowing out of the region in a big way since last week. It's moving out from the emerging markets to the developed markets," Jupiter Securities head of research Pong Teng Siew said when contacted by Business Times yesterday.

Foreign funds sold more shares than they bought this week, based on preliminary data provided by Bursa Malaysia.

So far this week, foreign funds were net sellers of almost RM1.2 billion as they sold RM3.4 billion worth of shares while buying only RM2.23 billion.

"I think this is just a continuation of profit-taking activities by foreign funds which started early this year. Let's not forget that a lot of these markets gained substantially last year," said Chris Eng, head of research of OSK Research Sdn Bhd.

Bursa Malaysia was one of the region's top performers last year, having gained 19.3 per cent to 1,518.91. Other top performers in 2010 were the Philippines (+37 per cent), Indonesia (+46 per cent), Thailand (+40 per cent) and South Korea (+21 per cent).

Nevertheless, Malaysia still outperformed other regional bourses like Singapore (+10 per cent), Taiwan (+9.6 per cent), Hong Kong (+5 per cent).

However, most of the regional stock markets this year have taken a dip. For example, the FBM KLCI has declined by 0.98 per cent so far this year, while stock markets in Indonesia, Thailand, the Philippines, India have declined by more than 8 per cent year-to-date.

Most Asian markets closed lower yesterday, led by the Philippines, Hong Kong, Taiwan, South Korea, Thailand, Singapore and Indonesia as the bourses dropped between 2.73 per cent and 1.28 per cent.

"I think one of their main concerns and beliefs is that lower-income emerging markets as well as middle-income emerging markets may not be able to cope that well with inflationary pressures as compared to the developed markets," said Pong.

Despite the bearish sentiments, analysts are reluctant to conclude that the stock market is now on a bear run.

Read more: KL stock market takes a beating

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