Malaysia leads falls in most Southeast Asian markets

REUTERS - Malaysian shares dropped more than 1 per cent to their lowest in three weeks on Wednesday, underperforming most others in Southeast Asia, as credit fears hit large caps such as Malayan Banking and CIMB Group Holdings.

Malaysia's benchmark stock index slipped to 1,773.29, the lowest since July 10. It was trading down 1.01 per cent at 1776.98 at 12.03 Singapore time, extending its loss over the past four sessions and wiping out most of the nearly 2 per cent gain recorded so far this month.

Ratings agency Fitch cut its outlook on Malaysia's sovereign debt to negative on Tuesday, citing gloomier prospects for reforms to tackle its rising debt burden following a divisive election result this year.

The downgrade sent the Malaysian ringgit to three-year lows on Wednesday.

Other Southeast Asian stock markets drifted into negative territory, tracking weaker global markets ahead of the outcome of the United States Federal Reserve policy meeting and the release of US GDP data.

The Philippines' key index lost 1.2 per cent while Jakarta's Composite Index eased 0.7 per cent, both reversing gains on the previous session that were helped by selective buying in a reporting season.

The Thai benchmark SET index pared early small gains to fall 0.6 perc ent, extending the previous session's loss of 1.3 per cent amid political concerns.

"Any rebound will be unstable as investors minimise activities ahead of the US FOMC meeting results released tonight and also the ECB meeting Tuesday. Locally, political uncertainties remain as parliament is going to reconvene this Thursday," broker KGI Securities said about Thailand in a report.

The region looks set to post mixed results in July after sharp drops in June, with Indonesia poised for a monthly loss of 5 per cent. Singapore and the Philippines are set to end almost 3 per cent higher in July, among outperformers.