PETALING JAYA: Since the beginning of March this year, global equity markets have experienced what experts are still divided on whether to call a bear market rally or the start of a bull run.
Leading the pack in Asia, Hong Kong’s Hang Seng index’s impressive 54% rise during the two-month period dwarfed the KL Composite Index’s (KLCI) 22% gain over the same period.
Citigroup, in an Asia ex-Japan strategy report dated May 18, said the “market had achieved in 10 weeks what normally takes 24 months”’ in terms of stock price recovery.
Such was the investors’ voracious appetite for Asian equities it was only matched by the intensity of the sell-off on the region’s stock markets last year.
But while the run-up over the past two months had made share prices neither cheap nor expensive compared to their historical average, pent-up demand for stock investment means there are still a lot of buyers coming in to take advantage of any slip.
“Coming off a depressed level in March, the global equity markets are enjoying an Indian summer,” MIDF Research head Zulkifli Hamzah said yesterday.
He added that there was still a lot of liquidity to prop up prices, but eventually market fundamentals would have to play catch up with share price advances.
On Bursa Malaysia yesterday, the KLCI shot up 11.48 points, or 1.3%, to 1,023.49 points. That was just below the eight-month high of 1,026 points hit on May 8.
Market turnover was a robust 1.75 billion shares worth RM1.6bil.
Blue chip stocks led the market higher, with 73 out of the 102 stocks that made up the KLCI closing in positive territory for the day.
In the broader market, rising stocks outnumbered losers 544 counters to 158, while 155 counters were unchanged.
The FTSE Bursa Malaysia Small Cap Index gained 3.5% yesterday, rebounding strongly after falling 7.6% over the past three days from a nine-month high.
The regional markets roared, with stocks in Hong Kong and Singapore surging by at least 3% to close at their highest levels since October last year.
In India, share prices moved in and out of positive territory after rising a record 17% on Monday following the Congress Party’s return to power with a bigger majority.
Apart from India’s domestic catalyst, most Asian markets were up yesterday propelled by growing optimism that the worst part of the global financial and economic crisis is already behind.
At current price levels, Citigroup says stocks in Asia ex-Japan are no longer a valuation call.
“It is a call on liquidity and on the psychology of the bear,” analysts Markus Rosgen and Elaine Chu wrote.
The analysts also have a bleaker assessment on the magnitude of a market correction compared to consensus forecast of 5% to 10% pullback.
“If a correction happens, we expect it will be 20%-30% with an increasingly unfavourable risk reward,” they said.
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