KUALA LUMPUR: Asian markets stumbled in the morning session on Friday, Jan 22, with Hong Kong and Japan benchmark indices falling 2.5% and 2.9% respectively while at Bursa Malaysia, the FBM KLCI fell below the 1,300 level.

Sentiment was impacted by concerns that China may increase interest rates and the overnight slide on Wall Street. At Bursa Malaysia, sentiment was further weighed down by a report from Credit Suisse which downgraded the banks to underweight on weaker earnings momentum.

At 12.30pm, the FBM KLCI was down 10.92 points or 0.83% to 1,297.44 . This was the biggest decline for the 30-stock index this year so far. Turnover was 541.39 million shares valued at RM673 million while declining stocks hammered advancers 639 to 89.

Hong Kong's Hang Seng Index fell  2.5% to 20,332.51, Japan's Nikkei 225 lost 2.9% to 10,553.29 and Singapore's Straits Times Index declined 2.1% to 2,791.91.

Light crude oil fell 23 cents to US$75.85, US spot gold shed US$2.27 to US$1,091.68 and crude palm oil futures RM35 lower at RM2,453.

Credit Suisse acknowledged the macro backdrop for banks is supportive in Malaysia - benign inflation, negative real interest rates and a government that is tackling the structural problems in Malaysia.

"But the earnings momentum is the weakest in Asia. Consensus forecasts put Malaysian banks' earnings growth at 16% in 2010E, the slowest in Asia. Flat margins and a relatively smaller decline in credit costs are responsible for this outcome.

"Malaysian banks are trading at the highest P/TB (price-to-book) and second highest P/B and P/E among Asian banks. Public Bank and CIMB feature among the top-four costliest banks on P/TB 2010E," it said.

CIMB fell 20 sen to RM13.30, dragging the FBM KLCI index down by 2.29 points while Maybank lost six sen to RM6.92 and AMMB eight sen to RM5.18 while Public Bank shed four sen to RM11.96. Hong Leong Bank lost three sen to RM8.40 and EON Bank nine sen to RM7.01.

Plantations fell with United Plantations down 30 sen to RM13.50, PPB 24 sen to RM16.62 while Sime shed five sen to RM8.89 and IOI three sen to RM5.47. Genting lost 13 sen to RM7.27.

Among glove makers, Supermax shed 24 sen to RM5.15, Latexx-WA 22 sen to RM3.18 and Adventa 21 sen to RM3.41.

MPI was the top gainer, rising 13 sen to RM6.45 while MTD added 10 sen to RM2.8, Prduren nine sen to RM1.59.