The local stock market continued to surge strongly yesterday, propelling the KLSE Composite Index (CI) briefly above 800 points before profit-taking pulled it back below the psychologically important mark.
The index, which rose by as much as 21 points to 800.7 in the morning, eventually ended the last trading day of the week at 790.6. But that was still 11 points or 1.4% above Thursday's closing level, taking the CI's total gain for the week to some 50 points or 6.8%.
The index's closing yesterday was also its highest since April last year.
Trading volume remained high with 1.03 billion shares worth RM2.33bil changing hands during the day, as investors, in particular foreign institutional funds, continued to chase blue chips and index-linked counters.
Dealers said foreign funds, which had flocked in to buy Malaysian stocks after a surprise credit rating upgrade of Malaysia by Standard & Poor's (S&P) on Thursday, were snapping up shares on speculation that two more international ratings agencies, Moody's Investors Service and Fitch Ratings, might announce similar upgrades.
They said the bullish market sentiment was also fuelled by the just-released upbeat Industrial Production Index (IPI) figures for August, which indicated the country's economic recovery was gathering momentum.
A senior manager of a local stockbroking firm said there was a significant presence of foreign buyers over the past two days, notably those from the United States and Europe.
He believes that foreign fund managers are now looking to increase their exposure to Malaysian stocks as many would be rebalancing their portfolios to take into account the S&P upgrade.
The relatively cheaper valuation of the local bourse compared with regional markets such as Indonesia and Thailand, as well as a comparatively weaker ringgit vis-a-vis the region's currencies, also provided an added incentive to buy Malaysian stocks, the senior brokerage manager said.
But while foreign funds were big buyers in the past two days, some local funds were selling to take advantage of the sharp spike in share prices.
TA Unit Trust Management Bhd general manager (investment) Mohd Hasnul Ismar said the company had decided to lock in profits given the sharp price gains over the past two days.
“Although we are optimistic about the KLSE in the medium to long term, we decided to take profit as we feel that share prices are rising too fast.
“We prefer to see healthy consolidation in the stock market now, followed by gradual rises later, rather than go all the way up in such a short period of time,'' Hasnul said.
KLCS Asset Management executive director Connie Ong said the CI's 40-point gain over the past three days had been somewhat “sudden and too concentrated on big cap stocks''.
“Going forward, the smaller cap quality stocks should move higher given the current buoyant sentiment, as big cap stocks are now fairly valued,'' she added.
Ong felt that the timing of the S&P upgrade was a surprise given that it was made before Malaysia's planned leadership transition.
She expects Moody's and Fitch to hold back any rating revisions until the country's leadership transition has taken place.
The research head of a bank-backed brokerage firm said the local market could see an inflow of foreign portfolio funds “in the billions'' following the S&P upgrade.
The current influx of foreign portfolio funds was not over, although its timing was impossible to predict, he added.
Among yesterday's top gainers were Genting Bhd, which shot up RM1 to RM17.90, Tanjong plc (up 60 sen to RM11), Petronas Gas Dagangan Bhd (up 50 sen to RM7.75) and Jaya Jusco Stores Bhd (up 45 sen to RM8.70).