KLCI was down 20.02 points or 1.21% to 1,637.59 where 29 out of the 30 stocks of the index fell.

Turnover was 1.90 billion shares valued at RM1.94bil. Decliners beat advancers more than two to one or 657 losers to 300 gainers and 303 counters unchanged.

JF Apex Securities Bhd head of research Lee Chung Cheng said that "Today's slump was still because of the worries on China's market and the volatility of oil price, the same reason for the past few market days."

"These external factors may overrule the upcoming festive sentiment like the Chinese New Year, which would boost consumption in the economy," Lee said.

Khazanah Nasional Bhd has so far pumped in RM1 billion into equity investment firm ValueCap Sdn Bhd to help shore up the market, its Managing Director, Tan Sri Azman Mokhtar said.

"A billion has gone in (so far). They don't need the whole amount in one shot. So they will progressively draw down on those commitment," he said at the 12th Khazanah Annual Review here, Wednesday.

Malaysia is relatively in a far better financial position than countries such as Venezuela, Nigeria, Iran and Russia whose revenues have been adversely affected by the plunge in crude oil prices.

Its diversified economy, the Goods & Services Tax (GST) and rationalisation of subsidies have provided a certain amount of cushion in revenue contribution, economists said.

Brisk domestic demand coupled with greater private investments locally and contributions from the manufacturing, construction, agriculture as well as the services sectors including tourism also lent to the nation's coffers, they said.

The World Bank says Malaysia is a country with limited dependence on fuel commodity exports compared with other countries such as Algeria, Kuwait, Sudan and Venezuela where exports are at or exceed 80 per cent.

Affin Hwang Investment Bank Vice-President and Retail Research Head Datuk Dr Nazri Khan Adam Khan said falling oil prices have had a great impact on major oil producers such as Saudi Arabia which rely on petroleum for 70 per cent of its revenue as well as Nigeria, the largest oil producer in Africa.

However, Malaysia was no longer a significant oil producer with the government's effort to lessen its dependence on oil revenue.

The country has moved more towards non-oil revenue with the implementation of GST, among others, helping to partially mitigate the effect of oil volatility.

FBM KLCI rose 24.29 points or 1.52% to close at 1,625.21, in line with most Asian stock markets. Across the board, a total of 1.93 billion shares worth RM1.795 billion were traded. Market breadth was positive with 712 gainers compared with 217 losers.

KAF Investment Funds Bhd fund manager Gan Leong said the stock market was back in the positive territory mainly due to the rebound of oil price and also to the appreciation of the ringgit against the US dollar.

"The market reacted positively on the development of oil prices and ringgit,"he said