IT WAS another strong day for the local stock market. Foreign buying of blue-chip stocks pushed the KLSE Composite Index (CI) 20 points higher.
There appears to be a sudden rush to buy Malaysian equities after Standard & Poor’s (S&P) revised Malaysia’s credit rating from BBB+ to A-, close to the level of pre-crisis 1997. And many believe this is a new wave of foreign buying.
JP Morgan Malaysia head of research Tan Pye Sen described the buying on the stock market yesterday as ferocious.
A fund manager said he had “not seen such buying for a long time and some of the buyers were big-time foreign funds’’.
However, some dealers said this was not the biggest buying spree; and in the immediate term, issues of volume and value sustainability would arise, since the KLSE in recent times has not shown the ability to sustain such high volumes.
Nevertheless, the market has gained 42 points since it went on the upturned since Friday, the bulk of the gains recorded over the past two days. Yesterday, the index closed 2.61% or 19.79 points higher at 779, after breaching the 780-point mark intra-day.
The next target remains the crucial 800-point mark, and many stockbroking houses are already looking to review their CI targets upwards for the year.
Tan is of the view that the local stock market “is only a quarter way through the average length of a bull market as seen historically’’.
Crest Petroleum Bhd was the biggest gainer yesterday, adding RM1.40 to RM15.40 on news that it would buy a US$70mil drilling rig.
Telecoms giant Telekom Malaysia Bhd received a boost when S&P raised its foreign currency rating by one notch to A- from BBB+.
The stock gained 1.9% or 15 sen to RM7.95. Maxis Communications Bhd, still a hot pick among fund managers, rose 70 sen to RM7.50.
The day’s top loser was Autoindustries Ventures Bhd (Autoven), which shed 92 sen to RM3 following denial by Jawala Corp Bhd that it was initiating a takeover bid. British American Tobacco fell 75 sen to RM39.50.
Volume leader Mesdaq-listed MCM Technologies Bhd saw 25.6 million shares changing hands. The stock closed 3 sen higher at 51 sen. Public Bank (Foreign), which saw 24.5 million shares traded, rose 27 sen to RM2.96.
With the S&P upgrade seen as a catalyst, Southern Investment Bank associate director Tan Kee Keat said the buying would take the market to a different level.
“That would mean the market gaining greater strength with confidence returning. This would also mean the cost of borrowing would be substantially lower,’’ he said.
An analyst added that while some funds were playing catch-up since they missed the rallies on some Asian markets, others found Malaysia still offered a lot of value, since it was a laggard compared with many of its regional peers.
“The funds also like the Malaysian story: the ringgit peg, which is viewed as a natural hedge; the smooth transition of power; and some big cap Malaysian stocks having strong EPS (earnings per share) and low PE (price- earnings ratio).
As it stands, Malaysia’s weightage on the Morgan Stanley Capital International Far East free ex-Japan index is 7%. But foreign participation in Malaysian equities is about 3%–4%, an underweight position.
It simply meant there would be a lot more buying of Malaysian equities, the analyst said.