Stock prices on Bursa Malaysia surged on Friday, led by blue chips, as investor sentiment improved and the key FBM KLCI index tried to reclaim the psychologically important 1,300 point mark, ending just a shade below it.

The FBM KLCI surged 15.7 points to 1,299.8. Gaining stocks beat losing ones by a nearly 3-to-1 margin on higher volume of 941 million shares.

Actively traded stocks include AEM, SAAG, MRCB, Transmile, Maybank, LCL and AMMB. Major gainers include BAT, Genting, Top Glove, Maybank, DiGi and Tanjong plc. Losers include Shell and AMMB.

Global equity investors have been see-sawing between investor optimism and pessimism for much of the last month amid mixed US economic data and external problems.

Sentiment has improved recently as US economic data turned slightly better than expected, especially on the manufacturing front and private sector jobs market. The debt problems in Greece also appear under control as the government has proposed an austerity drive programme to cut the large fiscal deficit.

All eyes will, however, be on the crucial February US jobs report, to be released Friday night. This will set the tone for trading on Wall Street and regional bourses in the week ahead. Although the US manufacturing sector is recovering, there are concerns stubbornly high unemployment will continue to crimp consumer spending and stymie the recovery.

On the local front, Bank Negara raised the Overnight Policy Rate by 25bp to 2.25%. This was widely expected as the central bank slowly raises rates to more “normalized levels” after cutting them during the crisis. More importantly, it shows that the domestic economy is well on the path to recovery, as was also highlighted by the recent stronger than expected 4Q09 GDP growth.  

Looking further ahead, investors will also keenly await the New Economic Model to be unveiled by the Prime Minister by the end of March. This follows the economic liberalisation moves announced last July, both of which are expected to help reshape the country’s economic policy going forward and attract more foreign investments.