Market takes breather after 9-day run-up

  • Business
  • Wednesday, 09 Jul 2003


AFTER nine consecutive days of gains, the local stock market took a breather yesterday, with the KLSE Composite Index (CI) slipping back 3.4 points to 727 on profit-taking.  

It was the only market in the region to end the day in negative territory. All the other major regional bourses, including Hong Kong, Tokyo and Singapore, closed higher, taking their cue from the good overnight showing on Wall Street. 

Profit-taking was seen across the KLSE, from second liners to heavyweight stocks, except for those in the semiconductor and technology sectors. Trading volume was higher at 968 million shares compared with 903 million on Monday.  

Dealers said the CI's pullback had been widely expected, given its sharp 50-point gain over the previous nine trading days. 

Many described yesterday's decline as “reasonable,” with profit-taking well absorbed given the heavy volume over the past few days which averaged one billion shares a day. 

Indeed, most dealers remained bullish, saying that the CI was still on track for further rises in the coming months.  

JF Apex Securities dealing manager Peter Tai said it was “not unreasonable” to expect the CI to reach the 800-point mark by year-end based on current market sentiment. 

In the immediate term, however, the CI was likely to stay around current levels before posting more gains, he said. 

“The stock market needs to consolidate on its gains first, especially after the heavy trading volume seen last week. It's worth noting that settlements of last week's trades are due this week. Hence, profit-taking is widely expected this week,'' Tai added. 

Citigroup Smith Barney believes the CI could reach 800 points, higher than its fair value forecast of 765, based on the current excess liquidity in the market. In a report, the US-based brokerage said “an oxygen tent scenario” was unfolding in the Malaysian equity market in the second half and next year, and that such optimism could be hard to stop unless the global picture unexpectedly deteriorated. 

It listed 10 features that could contribute to the market bullishness. 

They include a probable global economic recovery that could boost domestic demand, a lower Malaysian currency and assets on a relative basis, a continued low interest rates environment, strong domestic liquidity and lower barrier of entry to retail investors after the standardisation of board lots to 100 units from 1,000, and an improved KLSE depth and breadth compared with other regional markets. 

A report by Credit Suisse First Boston (CSFB) said the KL market rally was developing into a bull market similar to that of the 1993 super bull run, based on key similarities between then and now.  

The five contributing factors put forth by CSFB were the implementation of a micro credit scheme similar to that in Thailand, the introduction of measures to re-ignite the residential property market, rising commodity prices, the improving services sector (in particular, tourism), and changes in the political leadership. 

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