The local bourse fell sharply on Tuesday with the market barometer Kuala Lumpur Composite Index (KLCI) down 2.81 percent, the biggest single-day loss in two years following a sell-off in regional stocks which was triggered by sharp fall in China stocks, dealers said.

The KLCI went down as much as 52.68 points to 1,220.19 intraday, before closing 35.79 points down at 1,237.08. It opened 0.56 of a point higher at 1,273.43.

Declining stocks outweighed advancers by 1,123 to 42 on volume of 3.699 billion shares.

“The correction was expected after last Friday’s run-up but not the big losses seen today,” a dealer from one of the local brokerage said.

The biggest one-day loss was recorded on Jan 12, 1994 when the key index dropped by 68.09 percent to 1,134.31.

The dealer said that investors were overreacting on the sell down in China which spilled over into the regional bourses.

The Shanghai stock market suffered its biggest one day fall in 10 years with the Composite Index closing 268.81 points or 8.84 percent lower.

“From year-to-date, we are the third best regional performer after Shanghai and Vietnam Stock Exchange, that is why when China falls, we are badly hit,” the dealer said.

Meanwhile, another dealer said that there was forced selling by foreign funds in the market and lack of support as investors continued to be concerned about the performance of Wall Street which was weak following signs that the oil price was on the rise again.

The Dow Jones Industrial Average closed down by 15.22 points to 12,632.26 as crude oil price climbed to US$61.59 per barrel.

The dealer said that the cautious market could also be attributed to the settlement period or T+3 after last week’s record high volume.

“Actually, it was the time for investors to settle their transaction as the market had recorded a high volume of 4.782 billion shares last Thursday,” said the dealer.

Moving forward, the dealer said that the market will continue to see profit taking correction amid weaknesses in overseas markets.

“The market is likely to consolidate due to lack of investors interest. Perhaps, the announcement of gross domestic data (GDP) later tomorrow will provide some support to the market,” the dealer said, adding that the current psychological support level will be at 1,180-1,200-points.