A RALLY sparked off by news that Valuecap Sdn Bhd, with RM10bil for local equity investment, had started operations last Friday lifted the KLSE Composite Index (CI) by more than 2% yesterday.
Strong buying interest pushed yesterday’s trading volume to an 8½-month high of 427.2 million shares compared with only 186 million shares last Friday.
The CI surged 15.7 points to 651.5 yesterday, with winners thumping losers nine to one.
Renong continued to top the top ten most active list, followed by MRCB yesterday. Renong surged to a two-month high of 50 sen, up 7 sen or 16.3%, while MRCB rose 16.5 sen to RM1.01.
MRCB was buoyed by news that the conglomerate was currently in talks to buy the entire equity interest in Landas Utama Sdn Bhd, which holds a 24.9% stake in UDA Holdings. The stock has leapt 34% since last Wednesday.
Dealers noted that local and foreign funds with an underweight position on the KLSE were nibbling on certain stocks so as not miss the boat should the upward trend gather further strength.
The sharp rise in trading volume was also supported by day traders in “situational plays,” dealers said.
The substantial gains were seen as a continuation of the uptrend that began last Friday on news that Valuecap would invest up to RM10bil in the KLSE over a period of time.
The newly established Valuecap is an investment holding company equally owned by Khazanah Nasional Bhd, Permodalan Nasional Bhd and Kumpulan Wang Amanah Pencen.
Analysts likened the RM10bil funds to an “anti-depressant” for the local bourse, which had been in the doldrums since late April last year.
“This is the type of news that the market needs to encourage buyers to return,” JF Apex Securities dealing manager Peter Tai said, adding that the news could be a catalyst for the traditional pre-Chinese New Year rally.
TA Securities head of research C.K Ngu said he has received more phone enquiries on stock selections. “Investors have shown interest in the market again. This will be good for the stockbroking industry.''
Despite the current improved sentiment and the fact that fundamentals of the local bourse are still intact, most analysts remain cautious on the market outlook in the first quarter due mainly to war fears in Iraq and heightening tension between the US and North Korea.
“War is always no good for equities. Geopolitical concerns may weigh down the market,'' HLG Securities analyst Stephen Soo said, although he noted that most technical indicators point to a KLSE bullish trend.
Soo expects strong profit taking to emerge at the 665-level and the market to enter a consolidation phase before heading higher.
Tai concurred that profit-taking would emerge at the 660-level should the uptrend continue from here. If the selling was well absorbed, the CI was likely to reach the 680-700 level in the near term, he added.