Malaysia market set to test 1,200-point level

Source: YVONNE TAN (The Star Online)


FBM KLCI rises for fifth day to finish at one-year high

PETALING JAYA: The current liquidity run may push the benchmark index beyond the 1,200-point level “soon” but concerns are mounting that the market may have become too expensive.

“It (the index testing 1,200) could be as early as August.

“There’s a lot of money out there in search of returns in the current low-interest rate environment,” said Pong Teng Siew, head of research at Jupiter Securities.

The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) raced on for the fifth day yesterday to finish at a fresh one-year high, up 15.95 points to 1,172.38.

Nineteen stocks in the 30-stock index ended higher. Around 1.1 billion shares changed hands in trades valued at RM1.63bil.

At current levels, the market was priced at 17 times price-earnings to 2009 earnings, which was the level reached during the bull run in 2007. “Valuations are looking a bit too rich,” Pong said.

Since the start of July, the index has risen some 9%, extending the rally which started in April. Year-to-date, it has surged more than 30%.

Chris Eng, head of research at OSK Research, has advised traders to “sell into strength”.

“It (the index reaching 1,200) could be sooner than we earlier expected,” said AmResearch managing director and regional head of equity research Benny Chew.

He said the current rally could also be fuelled by high hopes that corporate earnings would be positive in August.

AmResearch has said the FBM KLCI would achieve 1,190 points by the first quarter of next year. Corporate earnings were expected to post a 17% growth next year from a contraction of 8% this year, the house said.

“I think the liquidity run will carry into the next month or so; (and) any correction should be ‘gentle’,” Pong said.

At Bursa Malaysia, major gainers yesterday were mainly blue chips which make up the index. Among the gainers were Sime Darby Bhd which added 25 sen to RM8.15, British American Tobacco Bhd which ended up 25 sen to RM45.25 and IOI Corp Bhd which finished 22 sen higher at RM5.

Major losers included PPB Group Bhd and Petronas Gas Bhd, which lost 20 sen and 10 sen to RM14.30 and RM10.20 respectively.

Among the more actively traded stocks were KNM Group Bhd, TA Enterprise Bhd and Lion Corp Bhd.

Stock markets across the globe have rallied in recent weeks bolstered by strong gains on Wall Street which were fuelled by better-than-expected corporate earnings.

Regionally, markets were mainly up yesterday. Singapore’s Straits Times Index and Hong Kong’s Hang Seng Index finished up 1.84% each.

Separately, at a function yesterday, Bursa Malaysia Bhd chief executive officer Datuk Yusli Mohamed Yusoff said the merger of the main and second boards was on track for the launch on Aug 3.

“We’ve tested it, all systems are ready,” he said.

He said he hoped the new structure would be more facilitative of new listings.

“We would like to see some of the small and medium companies merge. Based on feedback, we believe foreign investors would like to see much bigger companies in the market,” he said.