Malaysia to take 3 years to recover from market slump

Malaysia's property market will take three years to recover from its slump, the slowest revival in more than two decades, reflecting the reach of the worldwide financial crisis, according to Regroup Associates.

"In the past four weeks, I've been staring at an abyss," said Allan Soo, managing director and founder of property consultant Regroup. "What's changed is the global recession."

A worldwide slowdown has sparked real estate slumps from Britain to Singapore, causing Malaysian developers such as Magna Prima to scale back projects. Values of luxury homes in Kuala Lumpur, where prices surged to a record last year, may fall as an oversupply looms, according to Soo, who declined to give a specific forecast.

Malaysia's property market took about a year to recover from the 1997-1998 Asian financial crisis, he said. The rebound from the latest slump might start in 2010 and take as long as the recovery from the 1985 recession, Soo added.

Compared with last year, interest from prospective buyers had dried up, he said. "Inquiries would come in right after we put up a signboard on properties. Now, there're none."

Home prices will come under further pressure as the number of high-end apartments in Kuala Lumpur doubles to more than 30,000 in the next three years, according to Regroup.

Economic growth in Malaysia next year is expected to slow to 3.5 per cent from about 5 per cent this year, according to the government's estimates.

Still, losses for homeowners might be capped because most bought properties in 2006 before the peak for less than RM1,000 (HK$2,174) per square foot, Soo said. The entry of foreigners last year pushed prices to more than RM2,000 , he added.

Signs of fewer home purchases have already emerged. Bank loans approved for home purchases in October fell to its lowest since February, according to the central bank.

SP Setia, Malaysia's largest developer, expects a 22 per cent decline in property sales to 1.1 billion ringgit in fiscal 2009, according to Citigroup. The Kuala Lumpur Property Index has slumped 51 per cent this year, outpacing the main index's 40 per cent slide.

Magna Prima said last month it cut the projected revenue from its biggest property development in northern Kuala Lumpur by almost half. - South China Morning Post

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KLCI slips below 900-psycholgical mark in mid-morning

PETALING JAYA: The Kuala Lumpur Composite Index slipped below the 900-psychological mark Monday morning as investors remained sidelined ahead of the government's announcement of an economic stabilisation plan today. The KLCI last closed below the 900-mark in June 2006.

At 10.05 am, the bellwether KLCI was down 16.81 points or 1.86% to 888.42 points, dragged lower by losses at Sime Darby Bhd and Genting Bhd. Major banking stocks like Public Bank Bhd, Malayan Banking Bhd (Maybank), RHB Capital Bhd, Bumiputra-Commerce Holdings Bhd and AMMB Holdings Bhd were among the top 10 lagging movers of the KLCI.

Deputy Prime Minister Datuk Seri Najib Razak did not mention specific measures last Tuesday when he announced plans to unveil the stabilization plan today. This morning, Najib, who is also Finance Minister, said the government will pump an additional RM5 billion of funds into ValueCap Sdn Bhd to double the latter's funds to RM10 billion. ValueCap was set up by the government in 2003 to invest in undervalued companies.

Speaking at the Khazanah Megatrends Forum 2008 in Kuala Lumpur, Najib also said Foreign Investment Committee (FIC) rules will be reviewed to make it more attractive for foreigners to pour in funds, especially in property and commercial sectors. He also said Malaysia's economic growth prediction for 2009 of 5.4% would be revised downwards due to worsening external developments.

Market breadth was negative with 297 declining stocks outnumbering 51 gainers almost six-to-one, while 107 others traded unchanged. Only 96.25 million shares worth RM133.7 million had changed hands one hour into trade.

Chartists, including those at Hwang-DBS Vickers Research, had predicted that the KLCI might fall through the psychological level of 900 today "to test its immediate support line of 890 points".

"And if the selling momentum persists, as stated last week, a key support line for the KLCI is set at 860 points. Based on the market insights last week, counters that look vulnerable to be sold down further include mid- and large-cap companies with high foreign shareholdings and those share prices that have fallen relatively less than the rest so far," Hwang-DBS said in a note this morning.

KNM Group Bhd continued to top the most active list. The stock was down 1.5 sen to 60 sen with 14.7 million shares done, while Gamuda fell 12 sen to RM1.42 with 7.07 million shares done.

Major regional markets were mixed mid-morning. The Nikkei 225, Hong Kong's Hang Seng Index, Singapore's Straits Times Index, Australia's ASX 200 Index and the New Zealand NZX 50 FF Gross Index were showing some gains. However, the Shanghai Stock Exchange Composite Index, Taiwan's Taiex Index and South Korea's Kospi Index were in the red.

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