Market rises, but well off highs

Written by InsiderAsia
Friday, 30 October 2009 17:37

The overnight rally on Wall Street lifted share prices on Bursa Malaysia higher at the open on Friday, Oct 30.

However, the local market closed well off its earlier highs due to profit-taking activities and uncertainty over the sustainability of gains on Wall Street. Most regional bourses fared similarly, opening sharply higher but paring much of their gains later in the day.

The FBM KLCI rose as much as seven points in the early morning, but ended the day just 1.5 points higher at 1,243.3. Market breadth was positive, with advancing stocks beating declining ones by a two-to-one ratio at the close. Trading volume totalled 999 million shares, roughly the same for this week.

Actively traded stocks include Time, KNM, Time dotCom, Sernkou, 3A Resources, MRCB and Lityan. Major gainers include Lityan, LKT, Berjaya Land and CIMB. Major losers include PPB, Petronas Dagangan and MISC.

Investors were earlier assuaged by the US’ 3Q GDP data, which showed the US economy returning to growth with a 3.5% annualised growth – after four quarters of contraction. The rise was higher than market expectations of 3.2%. This in turn led Wall Street’s major indices rallying with their best one-day percentage gain in three months.

The GDP data, which confirms the US has finally moved out of the recession, helped calm investors’ fears after the recent steep falls on Wall Street, and more mixed US economic signals, especially on housing and consumer confidence in the past week. Investors also welcomed data from Japan showing its unemployment rate fell to 5.3% in September from 5.5% in August.

Investors have looked towards further signs of economic recovery and better-than-expected US corporate earnings to justify the rally, although many view that global stock prices in general have also run ahead of the recovery.

While the recession is officially over, the road to recovery will likely be slow, especially in the US. Unemployment is still high, while the recovery in consumer confidence and the housing sector is still patchy, even though the worst is behind us. On the local front, investors will look towards the upcoming earnings season for further leads.