A RALLY on Wall Street that pushed the Dow Jones Industrial Average to its highest level in 14 months fuelled another strong day in Asia yesterday and, in the process, drove the KLSE Composite Index (CI) past the 730-point level to its highest in nearly a year.
Japan's Nikkei 225 surged 1.4% to its highest since July last year while Seoul's Kospi also rose 1.4%, to a level last seen in September 2002.
The star performer in Asia in terms of new highs was Bangkok's SET Index, which rose to a four-year high at nearly 526, after climbing for the third straight day. Singapore's Straits Times Index, however, fell 0.4% to 1,615.
On Wall Street, the Dow's 90-point rally to 9,412 was inspired by better-than-expected earnings of building materials supplier Lowes, which suggested that consumer spending was improving.
The Nasdaq rose 2.2% to 1,739 after an influential business magazine had a positive story on Advanced Micro Devices' new line of 64-bit microchips.
Expectations of an economic recovery in the second half of the year had stimulated interest in equities since the SARS outbreak was formally declared over, but the recent surge was put down to positive earnings reports from corporations.
The KLSE, which is just getting into the full swing of the current reporting season, has benefited from the external boosts, too, although some analysts point out that there is little domestic data to fundamentally boost the market.
“We anticipate the economic momentum for the medium term is still intact,'' said Fortress Capital Asset Management chief executive officer Thomas Yong.
“ROEs (return on equity) for corporates are rising on the back of improved capital deployment,'' he said, adding that portfolio flows were, however, slowing.
The KLSE rebounded yesterday with both the volume and value of shares traded surging nearly 50% and 27% respectively. Small-cap stocks once again dominated the attention of investors.
The CI rose 0.4% to 732 while the Second Board index climbed 1.15%.
Mesdaq counters were again heavily traded but its index only managed a gain of slightly less than 1%.
Analysts acknowledged that rotational interest was still lively and the market would be looking to the current reporting season to find fundamental reasons for the rally to continue.
Some analysts said the stronger-than-expected financial results for the June quarter could provide an impetus for an upgrade in 2004 earnings.
Others argued that 2004 earnings would be upgraded only if results for the July–September quarter beat estimates.
“It is still a stock pickers' market for the rest of the year,'' Yong said. “People won't look at 2004 until the end of the year.''
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