Malaysia KLCI Drops Most in Asia as Valuations Hit Two-Year High

Malaysia stocks fell the most in Asia after a rally by the benchmark index to a record on the last trading day in 2012 pushed valuations to a two-year high.

The FTSE Bursa Malaysia KLCI Index (FBMKLCI) declined 0.7 percent to 1,677.01 as of 11:54 a.m. in Kuala Lumpur, snapping five days of gains. The gauge reached a new high on Dec. 31 when it advanced 0.5 percent to 1,688.95. The market was shut yesterday for a holiday.

The KLCI Index traded at 16.04 times estimated earnings on Dec. 31, the highest level since Dec. 31, 2010. The gauge rose 10 percent in 2012 amid speculation government infrastructure spending will shelter the nation from Europe’s debt crisis and a global economic slowdown. The index’s gain last year is its fourth annual advance, the longest winning streak since 1989.

“It’s mainly profit taking,” Tan Lip Kwang, who helps manage the equivalent of $1 billion at K&N Kenanga Holdings Bhd., said by phone today. “On the last trading day last year, in the last 10 to 15 minutes, some of the key index stocks were pushed up drastically.”

The market gains on Dec. 31 took its 14-day relative strength index to 74.5, the highest since July 20, according to data compiled by Bloomberg. The RSI measures how rapidly prices have advanced or declined during the specified time period. Some analysts see a reading of more than 70 as a signal to sell.

Kuala Lumpur Kepong Bhd. (KLK) slid 5.3 percent to 22.72 ringgit today after its RSI hit 84.2 on Dec. 31, the highest level since July 11. AMMB Holdings Bhd. (AMM) led lenders lower after CIMB Group Holdings Bhd. (CIMB) analyst Winson Ng said in a report today industry loan growth will slow this year. AMMB declined 1.6 percent to 6.69 ringgit.

To contact the reporters on this story: Weiyi Lim in Singapore at wlim26@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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