Share prices on Bursa Malaysia finished broadly lower following other regional markets, which also witnessed earlier gains wiped off in a knee-jerk reaction after Moody's cut Japan's credit rating.
At close, the FTSE Bursa Malaysia KLCI (FBM KLCI) dipped 13.22 points or 0.9 per cent to 1,469.15, way off the day's high of 1,487.27, which was spurred by overnight gains on Wall Street on speculation of a stimulus plan to boost the United States' faltering growth. The FBM KLCI had opened 2.78 points higher at 1,485.15.
"The market fell abruptly as investors realised that the downgrade will have a negative effect on rest of Asia, although it is not as bad as U.S.," Jupiter Securities head of research Pong Teng Siew told Bernama here, today.
Moody's Investors Service cited large budget deficits and a buildup of debt since the 2009 global recession to cut its rating on Japan's government debt by one notch to Aa3, which also signals weak growth prospects.
Standard & Poor’s had downgraded the U.S. credit rating to AA+ from AAA.
"The impact of the downgrade is that Tokyo can't give near zero interest rates on government bond but the advantage is that 95 per cent of the government bonds are purchased by the domestic market," he explained.
On the flip side, even the five per cent of external buyers will probably shun away from the market, which doesn't augur well for Tokyo, he said.
A weaker Japanese economy will curtail the world's third largest economy's import capability and that will affect exporting nations like Malaysia, said Pong.
Japan's Nikkei shed 1.07 per cent to 8,639.61, Hong Kong's Hang Seng Index dropped 2.06 per cent to 19,466.79, Singapore's Straits Times Index eased 1.66 per cent to 2719.90 and Taiwan’s Taiex was down 0.63 per cent to 7,502.93.
"With Japan's credit rating being cut, investors turned more pessimistic and we are off for another roller coaster ride," said an analyst.
Globally, stock markets are waiting for some hints from US Federal Reserve Chairman Ben S. Bernanke of a possible stimulus plan this Friday, he said.
However, for now the volatility is here to stay, he warned.
Today, Bursa Malaysia's Finance Index shed 77.82 points to 14,032.16, the Plantation Index dipped 8.11 points to 7,281.83 and the Industrial Index slipped 56.54 points to 2,694.92.
The FBM Emas Index declined 92.88 points to 10,045.23, the FBM70 Index dipped 105.75 points to 10,946.47 and the FBM Ace eased 33.73 points to 3,764.0.
Decliners outnumbered advancers by 528 to 209 while 924 counters were unchanged and 448 others untraded.
A total of 892.352 million shares worth RM1.857 billion were traded today, up from 875.521 million shares valued at RM1.762 billion traded on Tuesday. -- Bernama
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