THE KLSE Composite Index (CI) yesterday broke through the technically important resistance level of 700 points, closing 10 points higher at a 10-month high of 703.
Dealers said buying support from funds and retail investors was continuing to drive up the market.
Trading volume ballooned to 745 million shares from 518 million shares on Tuesday, with 68 stocks hitting 52-week highs.
The uptrend was rather broad-based, with gainers thumping losers by a ratio of 4.5 to one.
The benchmark index has gained more than 80 points or 13.4% from its year's low of 620 on March 11.
Dealers said local institutional funds dominated trading. They said retail participation was increasing, but most retail investors, who had had their fingers burnt during the past several rallies, were still cautious.
Foreign funds were also said to be nibbling at certain stocks. However, their weighting on the KLSE remained low, given that other regional markets that have fallen more sharply were more appealing than the local bourse, they added.
The favourites of foreign investors Genting Bhd, Maxis Communications Bhd and Commerce Asset-Holding Bhd led yesterday's rises. Genting jumped 80 sen to RM15.40, Maxis rose 30 sen to RM6, and CAHB added 16 sen to RM3.64.
Global fund managers are said to be increasing their allocations for equities from fixed income instruments.
The latest rate cut by the US Federal Reserve, which was widely expected to be a catalyst for another round of rate cuts globally, made equities more appealing, said an offshore fund manager, who believes the current low interest rates would help spur economic growth.
He noted that there was an inflow of foreign funds into Asia since the regional economic scenario appeared better than other parts of the world such as Europe.
Jakarta and Bangkok are among the best performing markets this year, thanks to the heavy net inflow of foreign funds. Yesterday, Bangkok's SET Index surged 16 points or 3.5% to 477.7, Tokyo's Nikkei 225 Index leapt 314 points or 3.4% to 9,592.
Singapore's Straits Times Index rose 20 points or 1.4% to 1,477, Seoul's Kospi Index gained 11 points or 1.6% to 685.8 and Taiwan Weighted Index added 77.5 points or 1.5% to 5,095.
TA Asset Management Sdn Bhd senior general manager Ang Kok Heng said the market's uptrend would be led by rotational plays.
Investors will start to look for laggards that will be the next group of stocks to go higher,'' he said, adding that the hefty gains made on rotational plays would help lure retail investors back to the stock market.
JF Apex Securities dealing manager Peter Tai said biotechnology stocks, including pharmaceutical counters, warrants and Mesdaq counters, were likely to be the next themes for rotational play.
Analysts said the market was rising on expectations of an economic recovery in Malaysia and globally.
Whether the CI will be able to clear all the resistance levels on the way up is very much dependent on the country's economic performance,'' a head of research said. If the economic indicators show a rosier picture, the bulls will charge ahead. If not, the CI may reverse direction, as has happened in the last few rallies.''
On the technical indicators, StarBiz chartist K.M. Lee reports that the CI had pierced through the 700-point psychological resistance early in the afternoon to end at the day's high yesterday amid the renewed optimism about the market's direction.
Buying interest was broad-based as investors snapped up shares on easing fears over the health of the local economy following the announcement of a RM6.3bil trade surplus on Tuesday.
The daily slow-stochastics momentum index and the 14-day relative strength index are both heading north and there is room for further upside before they reach an overbought condition.
Immediate resistance is at 712 and the next upper hurdle is envisaged at the 730738 band.
And now that the CI has broken 700, it must stay above the 690-point support line to maintain the bullish tone