KUALA LUMPUR, May 4 — Rising optimism over the improving health of the global economy plus strong gains on heavyweights led to the benchmark Kuala Lumpur Composite Index breaching the 1,000-points psychological barrier today. The CI ended 18.62 points higher at 1,009.36 today. The last time Bursa Malaysia hit the above 1,000 level was in October last year. Some analysts are now projecting the CI to touch 1,077 points by the middle of the year.
However, Shahrul Kamal Ramli who is with equity sales for Macquarie Securities Group, said technical indicators and the flood of liquidity in the market seemed to point towards a modest room for upside before correction sets in. “KLCI had a strong run up since March. We are now in a base building process where most emerging-markets may confirm the extending up trend towards year-end as falling interest rates and easing inflation make equities more attractive than before,” he told Bernama here today. “While an intermittent correction is still likely, the increasingly positive sentiment worldwide prompts any market dip as a chance to buy on weakness,” he added. Shahrul added the global markets had strengthened as investors chose to focus only on positive economic data while ignoring the negative and Malaysia too had a fair share of market moving news. Among the stirring news was the announcement of RM5 billion for Valuecap Sdn Bhd to buy undervalued stocks in the local bourse. This was followed by the second stimulus package, while Bank Negara Malaysia (BNM) also did a string of rate cuts, and further liberalised the services sector. The political situation in the country has also taken a turn for better. The government continued with its efforts to boost investment and make the services sector more competitive. “The decisions came amid official warnings that the economy could shrink by as much as one per cent this year.” Malaysia was also hard hit by the global economic crisis, with exports down 15.9 per cent in February from a year ago. Shahrul said liberalising the services sector was also a good move. “The services sector is the largest, contributing 55 per cent to Malaysia’s gross domestic product last year.” The move to rely on services to at least 60 per cent is crucial as it would lessen the country’s reliance on electronics exports and commodities, Shahrul said. He added, however, despite the present positive sentiment, global equities markets may turn volatile later this week when the Federal Reserve is scheduled to release its findings on bank stress tests, which will show how many US banks lack sufficient reserves. Investors will also get a clearer picture of the US job market on Friday with the release of the April unemployment report, he said. “Late last year, foreign selling was at peak and fading come January-February 2009. “Foreign investors do nibble on their small positions but are yet to re-enter the KL market in a major way. Foreign funds view Malaysia as slightly expensive compared to other markets. “Signs of moderation in the pace of decline in economic activity have emerged and the domestic economy is expected to improve in the second half of the year. Until then, the key buyers of KL market remain mostly local,” he said. Meanwhile, Jupiter Securities Sdn Bhd’s head of research, Pong Teng Siew said the local market had entered into a small bull run since March this year with 20 per cent increase in the CI. “The uptrend in the KLCI is likely to continue until middle of the year supported by improving liquidity in the market,” he told Bernama in a telephone interview. He added that the additional units of Amanah Saham Wawasan 2020 and Amanah Saham Malaysia announced by Permodalan Nasional Bhd recently helped to boost the market. “A lot of funds in the market will make a difference. If the index keeps on rising, there’s a chance investors will invest in new funds,” Pong said. – Bernama