PETALING JAYA: Buying support for select heavyweight stocks helped the Kuala Lumpur Composite Index (KLCI) recover slightly yesterday after falling for eight consecutive trading days.
Nonetheless, uncertainty over the outlook on US interest rates continued to weigh on market sentiment as the Federal Reserve indicated it may raise interest rates again when it next meets on June 29.
This raised concerns that higher interest rates could slow global growth and curb demand for commodities. Prices of commodities like copper, oil and gold fell sharply last week, resulting in program selling in most bourses across the globe on Monday.
Yesterday, Japan, South Korea and Taiwan closed marginally lower while India managed to recover after Monday's huge fall. Malaysia, together with Singapore, Thailand and Indonesia, finished slightly higher.
The KLCI closed one point higher at 926.6, off an intraday high of 928 and low of 919.
The Emas Index rose 0.9 point to 214.2 while the second board index added 1.6 points to 92.6.
Gainers outnumbered losers 595 to 436 and 246 counters were unchanged. About 890 million shares, valued at RM9.2bil, changed hands.
The KLCI was mainly lifted by gains in Genting Bhd, Malayan Banking Bhd (Maybank) and Tanjong plc. Genting rose 60 sen, or 2.5%, to RM24.20, Maybank gained 10 sen to RM10.70 while Tanjong added 40 sen to RM13.50.
Lion Industries Corp Bhd was 13.5% higher at RM1.09 on anticipation that the company would benefit from its venture with Eastern & Orient Bhd to develop 5.28 acres of prime land in Kuala Lumpur.
According to OSK Securities, Bank Negara's move to maintain the overnight policy rate at 3.5% augers well for the equity market.
The brokerage said in a report that the rate pause meant that household de-leveraging, which was already apparent from the slower loans growth, would be modest.
Therefore, consumption spending could still be expected to shore up the overall economic growth as in the previous year, it added.
“No change in interest rate means a breather for businesses relying on bank loans, either for working capital or capacity investment,” OSK Securities said.
Furthermore, the ongoing merger and acquisition (M&A) activities should support the respective companies' share prices.
The latest M&A proposal involved Mesdaq-listed UBS Corp Bhd, which would be taken private by Britain-based Sage group for RM98.1mil, the research house said.
K&N Kenanga technical analyst Teoh Cheng Guan said the market was on the rebound as it had been oversold.
“It's due for a rebound although sustainability remains a question. The next support level is at 917–920,” he said, adding that the downside was limited, as the local bourse had not performed as well as regional markets.
TA Securities, on the other hand, maintains a cautious stance.
“We find the latest selling pattern in the global market very unsettling. What started off as concerns over inflation and the credibility of the new Federal Reserve chairman has now altered significantly the investment risk profile,” it said in a research note.
“We sense that investors are suddenly swinging to the other end of the risk spectrum by pulling back drastically their risky investments.
“This explains the sharp selldown in emerging markets like India and Indonesia and in commodities,” it added.
TA said the European Central Bank and Japan's intention to raise interest rates would be interpreted negatively, adding that the designation of Iris Corp Bhd last week and the latest warning from the Securities Commission on share manipulation could still weigh down sentiment.
The brokerage expects trading activities in the next few weeks to be volatile, with a possible downward bias.