THE country's smooth leadership transition and the listing of Astro All Asia Networks plc next week could set the stage for another stock market surge similar to the one seen two weeks ago.
And this could lift the KLSE out of its two-week-long doldrums, with selected blue chips and big cap stocks resuming the driver's seat to push the Composite Index (CI) above the critical 800-point mark.
Some analysts and fund managers believe that the stock market run-up 1½ weeks ago was just the beginning of a bullish trend, supported by solid underlying economic and political fundamentals that have remained stable, if not improved, over the past year.
A senior dealing manager at a local brokerage said the next stock market rally could lift the CI higher by 50 points, similar to the recent run-up. He expects quality blue chips, like those in the construction and plantation sectors, as well as the usual favourites of foreign funds such as gaming and banking stocks, again to lead the charge.
But unlike the last rally, local fund managers are expected to join in the buying this time, moving in tandem with foreign investors to push share prices higher.
Already, local fund managers, many of whom were selling to lock in profits from the last rally, have begun to accumulate stocks again in anticipation of the coming rally.
TA Unit Trust Management Sdn Bhd general manager (investment) Mohd Hasnul Ismar believes that the current market consolidation phase could be over by the end of this week and that the “second wave” of strong stock price rises could be set in motion by the middle of next week.
“We are now positioning ourselves for this coming rally,'' he said.
Another fund manager, who declined to be named, said his fund had also stopped selling stocks and was waiting to re-enter the market.
In fact, US-based stock brokerage Goldman Sachs recently issued a report saying that Malaysian shares had room to run higher, and said it expected the KLSE to post a good performance in the fourth quarter.
“Malaysia could be a surprise outperformer within the region,'' it said.
Goldman cited improving macroeconomic conditions, abundant liquidity, a shift from equities towards bonds, and a recovery in corporate profitability and capital expenditure as arguments for its bullishness about Malaysia.
It said the impressive progress made on the regulatory front in recent years had also changed its perception of the country.
Finally, Goldman said the impending transition of political leadership from Datuk Seri Dr Mahathir Mohamad to Datuk Seri Abdullah Ahmad Badawi on Oct 31 could help galvanise the equity market.
“Although Malaysia is not Asia’s least expensive market, we believe equity valuations are reasonable,'' it said, adding that it found value in selected large cap and mid cap stocks.
Yesterday, the CI managed to close 0.4 point higher at 781.4 even though it was in negative territory for most of the the day. OSK Research technical analyst Shin Kao Jack expects retail investors to focus on laggard stocks and lower liners such as those on the Mesdaq market in the immediate term.