Time to bottom fish for stocks?

KUALA LUMPUR - Analysts had mixed views as to whether now is a good time to bottom fish in the stock market as global markets continued their sharp descent.

Major US stock indices plunged by between 5.5 per cent and 6.9 per cent on Monday, their first day of trade after Standard & Poor's unprecedented cut in the US credit rating by one level to AA+, leading most Asian bourses to close sharply lower for the third straight day yesterday.

This saw the local 30-stock benchmark index, FTSE Bursa Malaysia Kuala Lumpur Composite index (FBM KLCI) shedding 1.7 per cent (or 24.85 points) to close at 1,472.14, off an intra-day low of 1,423.47.

The index has lost 4.8 per cent in the last three trading days.

HwangDBS Vickers Research, in a note to clients early yesterday, noted that investors will be more inclined to sell rather than buy equities following Wall Street's extended freefall.

"Given the prevailing jittery market mood, it seems too early to bottom fish at this juncture. Capital preservation will be the priority of most investors for now," it said.

CIMB Research advised investors to bottomfish gradually.

"Share price weakness is an opportunity to bottom-fish, albeit gradually," it said in a report yesterday, pointing out that consolidations of 20 per cent are not uncommon in major bull markets.

CIMB's economics team has kept its estimate of a 30 per cent chance of a double-dip recession happening in the US.

"As long as the stockmarket's travails do not pull down the US economy, which would hammer Asia's exports to the US, there should be a fair chance of decoupling by Asian markets," it said.

All eyes will be on the Federal Open Market Committee, which would have met late Tuesday in the US, to see if it comes up with new steps to drive economic growth.

Losses in the region yesterday were led by Hong Kong's Hang Seng Index (down 5.7 per cent to 19,330.70), Singapore's FTSE Straits Times Index (down 3.7 per cent to 2,884) and South Korea's Kospi Index (down 3.6 per cent to 1,801.35).

Investors sold-down shares on fears that a potential recession in the US and Europe's debt woes would hamper a global economic recovery.

"Realistically speaking, it will take time for sentiment to pick up again following the latest rounds of global equities meltdown until workable measures from the governments or central bankers of these troubled nations," said Hong Leong Investment Bank.

- Business Times