Late buying lifts KLCI higher

Written by Surin Murugiah

Wednesday, 01 July 2009 22:25

KUALA LUMPUR: The KUALA LUMPUR COMPOSITE INDEX [] (KLCI) closed higher on the third quarter's first day of trading as a last minute surge in buying lifted the index out of negative territory.

The index was in the red for most of today, falling to as low as 1,071.38 before gaining 0.39% or 4.16 points to end the day at 1,079.40, lifted by buying interests in selected blue chips.

Losers, however, led gainers by 388 to 219, while 203 counters traded unchanged. Turnover was 826.1 million shares valued at RM885.76 million.

Crude palm oil added RM35 per tonne to RM2,260 for August delivery and RM29 per tonne to RM2,259 for September delivery, while crude oil rose US$1.26 per barrel to US$71.15 (RM250.45) as at 6.30pm today.

AmResearch research head Benny Chew Yow Leng reiterated his view from last week that after rebounding 26% off lows in March 2009, the KLCI was now negotiating a mid-cycle correction.

"Our analysis of previous two bear rallies — in 1998/1999 and 2001 — indicates that the pullback after troughs tends to be transitory, stretching no longer than two months. And, the dips were 15%-22% off intermittent highs.

"This time around, the correction may be less dramatic because the starting point of the recent upswing was from a depressed trough price earnings of 11 times in March 2009, versus 16 times in April 2001,” he said.

He said in the immediate term, the KLCI might dip 10% off June's high, forming a base at 980.

Chew said the market would take time to respond to the measures announced by the government on Tuesday, adding that the measures were for the longer term.

"Our base case of an economic recovery by 4Q09 supports a positive earnings revision cycle, which has just started.”

"We raised our fair value from 1,050 to 1,190 by rolling-over the valuation base into 2010 on an unchanged PE of 15 times. Next leg up will be accompanied by a strong rebound in earnings (2010: +17%), set against a still-healthy liquidity backdrop,” he said.

OSK Research said although the KLCI chalked up a decent performance last month with a 31-point rise, the bout of profit taking in the middle of the month sapped the strength of its top picks, with only MMC CORPORATION BHD [] eventually outperforming.

It said while Najib's announcement of capital and property market liberalisation is positive, the reaction was rather muted.

"For July, we caution that the KLCI could well fall short of our initial sell trigger of 1,150 points.

"We advise investors to exercise greater caution and switch to a more defensive strategy with higher beta plays MMC Corp, WAH SEONG CORPORATION BHD [] and LION INDUSTRIES CORPORATION [] Bhd replaced with PUBLIC BANK BHD [], Axiata Group Bhd and TOP GLOVE CORPORATION BHD [],” it said.

Among the major gainers today, Tanjong and Nestlé (M) Bhd added 50 sen each to RM13.80 and RM31.75; United PLANTATION []s Bhd rose 30 sen to RM12.90, BRITISH AMERICAN TOBACCO (M) [] Bhd up 25 sen to RM45 and PPB GROUP BHD [] added 20 sen to RM11.80.

BUMIPUTRA-COMMERCE HOLDINGS [] Bhd and MISC BHD [] advanced five sen each to RM9.10 and RM8.60, while RHB CAPITAL BHD [] rose eight sen to RM4.22.

MALAYAN BANKING BHD [] (Maybank), YTL CORPORATION BHD [] and PETRONAS DAGANGAN BHD [] were among the major losers today and fell five sen each to RM5.85, RM6.90 and RM8.30, respectively, while KUMPULAN PERANGSANG SELANGOR [] Bhd lost seven sen to RM2.04.

KNM GROUP BHD [] was the most actively traded counter today with 60.3 million shares done. The stock fell two sen to 82 sen.

Over at the regional markets, Japan's Nikkei 225 slipped 0.19% to 9,939.93; Taiwan's TAIEX Index rose 2.2% to 6,578.97, the Shanghai Composite Index added 1.65% to 3,008.15, the South Korean Kospi gained 1.55% to 1,411.66 while the Singapore Straits Times Index was up 0.83% to 2,352.55.

Hong Kong's financial markets were closed today in conjunction with the anniversary of the territory's handover to China from Britain. The European markets opened higher today, with London's FTSE100 and the DAX Index advancing nearly 1.5% in early trade.

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Last Updated on Wednesday, 01 July 2009 22:32

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