KUALA LUMPUR: Markets collapsed across Asian and European equities on Monday after weak US jobs data fanned fears of a recession in the world's top economy and boosted bets on several Federal Reserve interest rate cuts.
As global indices tanked led by Tokyo's Nikkei, Bursa Malaysia was not spared as its benchmark FBM KLCI saw its steepest one-day loss in years.
Positively, the ringgit strengthened against the US dollar to 4.4250, its highest since the first quarter of 2023.
The key index settled at midday 2.75 per cent or 44.38 points lower to 1,566.67 before widening the loss to 4.63 per cent or 74.57 points to close at 1,536.48.
The widespread selling in the market also led to a sharp decline in more than a dozen stocks on Bursa, triggering a wave of suspensions in intraday short selling (IDSS).
IDSS activities will be suspended when the last price of approved securities fall below the daily limit. The daily limit is 15 per cent for stocks above RM1 and 15 sen for counters under RM1
Regionally, Tokyo's Nikkei lost 13 per cent in its worst day since the Fukushima crisis in 2011. It also suffered its biggest points loss, shedding 4,451.28.
Seoul and Taipei plunged more than eight per cent each, while Singapore gave up nearly five per cent and Sydney more than three per cent.
Hong Kong and Shanghai lost more than one per cent, with traders brushing off a set of directives released by China aimed at boosting household consumption in the world's number two economy.
There were also big losses in Mumbai, Bangkok, Manila, Jakarta and Wellington.
Several bourses across Asia have also had their circuit breakers triggered due to the severity of the selloffs.
SPI Asset Management managing director Stephen Innes said the market was in the midst of a value-at-risk market downturn that is complex to navigate and challenging to predict when it might end.
"However, I believe we are not far from hitting the bottom, at which point we could see support rallying from major central banks, particularly through dovish policies from the Federal Reserve, and possibly the Bank of Japan.
"Investors in Malaysia are showing signs of retreat from the stock market, highlighting the interconnectedness of global economies. This pullback is particularly noticeable as economic disturbances in the US often have a ripple effect, influencing Asean exporters significantly.
"The saying 'when the US sneezes, Asia catches a cold' aptly describes this dynamic, as the Asean market's fortunes are closely tied to the health of the US economy, affecting local investor sentiment and behaviors," he told Business Times.
Innes said the heightened risk-off environment has likely caused both traders and investors to retreat from the market.
He said a bigger concern is the potential reaction from global risk managers that may instruct trading desks to shift away from risky or even profitable assets.
"The goal here would be to raise cash and cover potential shortfalls, a defensive move that reflects a broader strategy to safeguard portfolios against further downturns. This cautious approach underscores the market's current volatility and the prevailing uncertainty influencing financial strategies worldwide," he added.
Despite the volatile market conditions, Innes said the Fed could be ready to implement more aggressive rate cuts.
He said such a move might initially cause ripples of panic across Wall Street and Asian markets, driven by concerns that the Fed is lagging in its response to economic indicators.
"However, the mere possibility of aggressive rate cuts has a unique power to boost the US. stocks.
"This effect tends to be even more pronounced if there is any stabilisation or modest improvement in the US economic data, as these cuts could be seen as preemptive rather than reactive, bolstering investor confidence and market sentiment," he said.
Tradeview Capital fund manager Neoh Jia Man said the index might have found a bottom today, as most stocks had recovered from their day-low, indicating that dip-buying activities are beginning to take place.
"In our view, the correction may have been overdone in the near term, as the ongoing earnings season suggests that U.S. corporate earnings growth remains solid," Neoh said.
Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng said although the signs of a US economic hard landing were anticipated, the investing community had largely ignored them, focusing instead on Wall Street's record-breaking run since early this year.
"Without speculating further, we believe it's time to consider a Buy on Weakness approach as today's sell-off on Bursa has been excessive.
"We expect the local market to be supported at current levels, especially as GLICs (government linked-investment companies) have reduced their foreign equity holdings since early this year,"