Stock markets around the region fell sharply on Friday, Jan 22 after Wall Street plummeted overnight on concerns over the proposed new regulations for the US banking sector, continued weak economic data and China’s tightening measures.

The Dow Jones Industrial Index fell 2% on Thursday, wiping out all of its new year gains after President Barrack Obama proposed to crackdown on the big banks, regulating what the banks they can own, do or invest in.

This is positive to limit risks for the banking system in the aftermath of the recent financial crisis. However, they will also severely the big banks’ size and earnings potential, which was what investors focused on, sending bank stocks lower.

Wall Street’s slump only served to exacerbate recent concerns over China’s recent string of credit tightening measures, which may threaten to burst China’s lending fuelled bubble – and a major engine of growth for the region. The ongoing US earnings season has also not sparked major surprises – unlike previous quarters, as expectations were already much higher and largely priced in.  

Shares on Bursa Malaysia traded lower on Friday, in unison with its peers and followed the regional trend which saw most bourses opening sharply lower and recovering later in the afternoon. Fortunately, its decline was comparatively less and the key FBM KLCI index remained at the 1,300 point level. At its intra-day low, the index fell about 12 points before recovering to end 7.9 points down at 1,300.5.

Declining stocks beat advancing ones by a 2-to-1 margin at the close, while volume declined from 1.07 billion to 1 billion shares. The steady decline in trading volume, from as high as 1.76 billion shares last Thursday, suggests more investors are staying on the sidelines. But at least, it also indicates the lack of large selling pressure.

Actively traded stocks comprised mostly retail stocks and lower liners, including the likes of Ariantec Global, Talam, KNM, L&G, Bintai, IRCB and Pentamaster. Axiata was the only notable active blue chip among the top ten actively traded stocks. Major gainers include MPI, Lafarge Cement, YTL Corp, AEON and Rubberex. Losers include KL Kepong, BAT, Proton and CIMB.