FBM KLCI hits 17-month high

Written by Isabelle Francis
Wednesday, 21 October 2009 00:25

KUALA LUMPUR: Asian markets on Oct 20 continued their relentless rally, with the MSCI Asia Pacific Index reaching a 13-month high, after key indices advanced by as much as 1.52%, as investor sentiment perked up on expectations of a stronger economic recovery.

On Bursa Malaysia, the FBM KLCI rose to a 17-month high of 1,265.74, up 0.34% or 4.25 points, underpinned by gains in banking and PLANTATION [] stocks including CIMB Group Bhd, AMMB HOLDINGS BHD [] and IOI Corp Bhd. The 30-stock index has risen 44.37% year-to-date.

Sentiment was boosted by a stronger-than-expected global recovery after US industry bellwether Caterpillar Inc reported strong quarterly results.

Earlier, Apple Inc’s better-than-expected earnings helped shore up sentiment on Wall Street on Monday. Its profit and sales beat forecasts as it sold more iPhones and Mac computers, extending a run of strong results last week for leading US banks and companies.

Australia’s S&P/ASX 200 Index closed 1.11% higher at 4,846.20 on Oct 20, after the country’s central bank signalled more interest-rate hikes as economic growth gathered momentum.

Shanghai’s Composite Index rose the most, adding 1.45% to 1,073.48, Japan’s Nikkei 225 rose 0.98% to 10,336.84, Hong Kong’s Hang Seng Index was 0.83% higher at 22,384.96, but Singapore’s Straits Times Index slipped 0.02% to 2,711.09.

The Dow Jones industrial average (DJIA) had crossed the crucial 10,000 mark on Oct 14, to close at 10,015.86.

But US stocks fell shortly after the open in overnight trade as disappointing economic data offset the strong quarterly results from Apple and Caterpillar. The DJIA was down 9.14 points, or 0.09%, at 10,083.05 while the broader Standard & Poor’s 500 Index fell 1.28 points, or 0.12%, to 1,096.63.

Oil briefly topped US$80 (RM269.60) per barrel — its highest since October 2008 — while US spot gold rose US$2.48 to US$1,066.65 per troy ounce due to a weakening US dollar and expectations of increased demand.

On Bursa Malaysia, BRITISH AMERICAN TOBACCO (M) [] Bhd rose 42 sen to RM45.02, PETRONAS GAS BHD [] added nine sen to RM9.79, DIGI.COM BHD [] and Tanjong plc gained six sen each to RM21.50 and RM15.62.

Among plantations, KUALA LUMPUR KEPONG BHD [] advanced 20 sen to RM15 and IOI Corp rose eight sen to RM5.54. AMMB led gains among banks, adding 14 sen to RM4.76, while HONG LEONG BANK BHD [] advanced 13 sen to RM7.38, MALAYAN BANKING BHD [] five sen to RM6.98, and PUBLIC BANK BHD [] two sen to RM10.66.

Sarawak Energy Bhd rallied 45 sen or 21% to RM2.59 following an offer from the Sarawak government to acquire the remaining shares it does not already own for RM2.65 cash apiece under a privatisation exercise.

Leading the losers was RHB CAPITAL BHD [], which is acquiring an Indonesian bank for RM1.16 billion cash, to be funded by a proposed rights issue. RHB Cap fell 24 sen to RM5.45.

SJ Securities Sdn Bhd’s deputy managing director and executive director of dealing Peter Lim believed that the stock market recovery was sustainable although it would not rise as much as it did earlier in the year.

The research house’s target for the FBM KLCI is 1,300 by year-end. Lim said the index may even hit 1,500 if foreign investors returned.

“If the funds come back in a big way, we could see it hit that level, but perhaps investors are waiting for the market to correct next year before coming in.

“We are almost there (1,300), but it may be dampened slightly because of profit-taking possibilities. But we have to remember we are governed by cycles.

“Bar window-dressing, hitting this level would be a fantastic achievement.

“The stock market has seen a rise of almost 70% from the previous low of 800 (in late October last year), so while it will rise, it will not go up as drastically as it did before. We are at the higher end of the stock market now,” Lim said.

OSK Investment Research’s head of research Chris Eng does not see the current market performance as a short-lived pre-Budget rally and expects the market to advance until the second quarter of 2010, with possibly “small retracements here and there”.

“We don’t expect the rally to end after the budget, unless there are really disappointing news from the announcement. We believe that it would be a moderate budget and that the government would continue to focus on the country’s deficit,” he added.

Eng said market liquidity, quarter-on-quarter growth in corporate earnings and gross domestic product as well as the award of more CONSTRUCTION [] contracts would aid the rally. OSK sees the support level at 1,232 and resistance at 1,305.

Maybank Investment Bank head of retail research Lee Cheng Hooi agreed that the bullish stance could extend beyond this week if buying by foreign funds continued to be encouraging.

The research house sees support levels for the FBM KLCI at 1,250 and 1,268, and resistance levels at 1,275 and 1,300.