THE KLSE Composite Index (CI) put on seven points or nearly 1% to close at 798 yesterday. And most analysts are confident the CI will end the year above the 800 resistance level.
However, there are mixed views on the breakout that started on Monday: whether it is the resumption of the rally begun earlier this year or just a phenomenon fuelled by the traditional year-end window-dressing.
Local fund managers contacted by StarBiz are generally positive on the local bourse because domestic and global economic prospects are improving, as seen in the third-quarter gross domestic product (GDP) growth in Asia and the increase in US consumer spending.
“We are in a different cycle now. Economic recovery is gaining strength globally, so investment funds will be switching from bonds to equities,'' said TA Asset Management Bhd senior general manager Ang Kok Heng.
“By and large, the stock market will head higher in the next three years as economic growth continues, although there will be hiccups along the way,” he said.
Ang finds that KLSE share prices have yet to factor in the earnings growth that the improving economic fundamentals portend.
“Many are still sceptical about the economic scene,'' he noted.
But he is optimistic, saying the investing risk for equities is lower now because of better corporate earnings visibility.
Some local fund managers also pointed out that investment analysts might have “under-estimated'' companies' earnings growth.
This could be due to the experiences of analysts in the past two years, when economic growth was halted by unprecedented events, such as the outbreak of SARS and the war in Iraq.
Nonetheless, some fund managers described the current level as a bit “expensive'' to buy, yet too low to sell.
SBB Securities senior analyst Ng Jun Sheng said that for the near term window-dressing activities would lend support to the KLSE.
He noted that the current positive sentiment augur well for MALAYSIAN BULK CARRIERS BHD, which made its debut on the main board yesterday, and also for Khazanah Nasional Bhd's covered warrants, which list tomorrow (See Page 5).
However, Ng said the local bourse would range-bound for the rest of the month because most institutional investors were unlikely to take up new positions at this time.
He expects the CI to close above the 800-point mark by year's end, with the likelihood of testing 820.
Dealers said there was persistent buying interest, although not strong, in the heavyweights yesterday.
As selling had dried up after the recent sharp correction, which sent the CI to a low of 766 points, some moderate buying of CI-linked counters would be able to lift the benchmark index easily, they said.
The CI had put on 18 points in the past two trading days. Speculative interest in lower liners also contributed to trading volume, which expanded to 653 million shares yesterday from 618 million on Monday.
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