8:58 pm - KLCI headed lower !

Malaysian shares close sharply lower on Wall St fall, regional downturn - UPDATE (Updating to add analyst comments and share prices) .

KUALA LUMPUR (Thomson Financial) - Malaysian shares closed sharply lower Monday in line with a regional downturn following Wall Street's fall Friday and as cautious investors took profits ahead of rate-setting meetings here and in the US this week. Late bargain-hunting in select blue chips and small caps helped limit the market's fall. Bank Negara, the Malaysian central bank, is widely expected to leave its overnight policy rate at 3.5 percent tomorrow given the uncertain outlook for the global economy. US President George Bush will deliver his State of the Union address later today, with investors looking for further details on Washington's 145-billion-dollar fiscal stimulus plan. Meanwhile the Federal Reserve will begin its two-day meeting on Tuesday. The Kuala Lumpur Composite Index (KLCI) closed down 24.86 points or 1.8 percent at 1,380.54, off a low of 1,372.61. The FTSE Bursa Malaysia 30 large-cap index shed 158.19 points or 1.7 percent to 9,062.75 and the FTSE Bursa Malaysia second board index lost 78.23 points or 1.2 percent to 6,449.87. The plantation sector was the worst performer, with the sub-index losing 265.76 points or 3.4 percent to 7,623.34. Decliners beat advancers 665 to 168, with 186 stocks unchanged and 373 untraded. Trading volume was 727 million shares valued at 1.4 billion ringgit. "Profit-taking set in today after recent strong gains, made worse by investor caution ahead of President Bush State of the Union speech later tonight and the uncertainty over whether the Fed will cut interest rates,'' said S. Sharath, acting head of research at MIDF Amanah Investment Bank. The local bourse will continue to track Wall Street's performance and may stage a rebound tomorrow if investors react positively to President Bush's speech later, he said. "There is a chance that the Fed may not cut rates, as last week's drastic reaction by the Fed appeared to be an inadvertent bailing out of the fraud-fraught Societe Generale's unwinding of long positions," said Vincent Khoo, head of research at Aseambankers Investment Bank, in a note. On the other hand, if the Fed does cut rates, it's likely to spark a rally in Asia. The Fed decision on interest rates is due Wednesday. Sime Darby, the world's largest listed palm oil company, fell 20 sen or 1.7 percent to 11.90 ringgit and IOI Corp, the second-largest palm oil stock on the local bourse, shed 35 sen or 4.6 percent to 7.20 ringgit. Kuala Lumpur Kepong, one of the largest palm oil companies in Malaysia by planted area, fell 20 sen or 1.2 percent to 16.90 ringgit. "Although we believe most funds may still be overweight in the plantation sector, some funds are starting to note that the sector has become 'overcrowded' and have trimmed positions," said Khoo. Among other index heavyweights, Maybank was steady at 11.70 ringgit. Malaysia's largest bank may appoint Abdul Wahid Omar to replace its incumbent chief Amirsham A Aziz, whose term will end on June 30, the Edge Financial Weekly reported, citing unidentified sources. Abdul Wahid is currently the chief executive officer of Telekom Malaysia. Maybank is believed to have submitted a proposal to the central bank for Abdul Wahid to succeed Amirsham, the newspaper said. Shares of Telekom Malaysia were unchanged at 11.30 ringgit and national power utility Tenaga dropped 25 sen or 2.7 percent to 9.05 ringgit. DiGi.com, the local unit of Norway's Telenor, fell 20 sen to 22.90 ringgit as it resumed trade after the formalization of a deal to acquire broadband spectrum from TIME dotCom, a loss-making state-linked carrier. TIME dotCom gained 2.0 sen or 3.0 percent to 69.5 sen. Meanwhile, the Malaysian ringgit was quoted at 3.2420/2450 against the US dollar, while 3-month interbank rates were at 3.61/62 and overnight rates stood at 3.49/50.