The Day the Bursa Ran Amok!

Yes,taking the cue from data signaling the recovery of the US economy,the Malaysian stock market almost went ballistic!

This is Lee Kian Seong's report in the online STAR today.

The FTSE Bursa Malaysia KLCI hit a new high yesterday, closing 18.47 points higher at 1,551.89, on high volume and positive investor sentiment.

Trading volume swelled to over two billion shares as investors were cheered by encouraging data from the United States and regional markets buoyed by rising liquidity.

After a long absence, Malaysia is also back on the radar screen of many international houses.

HwangDBS Investment Management  head of equities Gan Eng Peng noted that last month, manufacturing in the United States grew at its fastest clip in seven months, sending US stocks to two-year highs.

“Investors' reaction was supported by encouraging data from the United States that suggested the economy is improving. Stocks in the United States did well on the first day of trading for the year, and investors call it the January barometer',” he told

StarBiz.Data released in the US on Monday indicated that the manufacturing sector grew in December at its fastest pace in seven months, reinforcing recovery signs.

Gan said foreign investors were increasingly confident about investing in countries like Malaysia.

“For the first time in many years, international research houses have recommended Malaysia as a stock market investment destination over and above many other markets in Asia Pacific .

“If you take this in the context where foreign ownership of stocks remains near historic lows, there could be a lot more buying activity, going forward,” Gan said.

Among the top gainers yesterday were British American Tobacco (M) Bhd which rose 60 sen to RM46.40; Sime Darby Bhd (+ 51 sen to RM9.46) while Nestle (M) Bhd (+42 sen to RM43.84) .

Gan said the multiple catalysts announced under the Economic Transformation Plan (ETP) and Budget 2011 would essentially benefit key stock market sectors like construction, building materials and property.

The ETP, if successfully implemented, would help to sustain the momentum.

An analyst from a local investment bank said the gains yesterday on the local bourse was in line with performance of the regional markets with positive news flow from the expected elections in Malaysia.

He said the current resistance level was between 1,560 and 1,570 points while support is between 1,505 and 1,500 points.

Fortress Capital Asset Management chief executive officer Thomas Yong said the rally in the stock market was not only in Malaysia but across regional markets where there was a lot of liquidity.

“Bond yields are currently very low and it is also expensive to invest in bonds. Thus, equities continue to be the preferred instrument at this point of time.

“It is not surprising that the market is going up but it has to do with more than just the expected elections this year,” Yong said.

Investors are moving back into their positions in the market after easing off in the last one month and they are accumulating stocks again.

“Foreign money has been coming in since middle of last year but it is not really huge in terms of large inflows. Certainly, there has been foreign buying but it is more from local investors,” Yong said, adding that commodities-related stocks were favoured by these funds.

It is not easy to judge whether the stock market momentum is sustainable but Yong believes it will sustain in the short term. However, the market is expected to be fairly volatile this year.

On the market risks, Yong pointed out that interest rates were expected to rise later this year and this could affect sentiment.

“Investors expect to see between 15% and 20% growth in corporate earnings in Asia this year. If the growth is not seen in the coming months, market confidence may be affected,” Yong said.

Looks good but beware. Remember market fortunes are made on how early you enter and how good is your timing on leaving counters.