PETALING JAYA: The FBM KLCI was buzzing with activity as positive sentiment from overnight Wall Street gains and more business activities opening across the globe stoked stocks.
Penny stocks were fervently at play, particularly with the Dow Jones futures up 0.86% at press time, hinting of more price action in the days to come.
This was despite renewed rumblings of a US trade war and political tensions in Hong Kong.
The FBM KLCI ended the day up 14.97 points to 1,451.73. This was on volume of 7.2 billion shares valued at RM4.78bil.
Investors were probably confused, as most saw the present rally as “disconnected from reality, ” and one that is artificially induced by the monetary stimulus of central banks around the world.
Over the past eight weeks, 36 million Americans have filed unemployment claims.
US GDP plunged by 4.8% in the first quarter of 2020.
Yet the US stock market surged by 13.2% in April, the largest monthly increase since 1987.
While it is easy to be fixated on the current dire situation, this is not expected to continue indefinitely.
“As they reflect all future earnings of a company, stock prices not only capture the near-term negative outlook, but also a subsequent recovery, ” said Schroders strategist, research and analytics Sean Markowicz.
OANDA Asia-Pacific senior market analyst Jeffrey Halley said that global recovery hopes are trumping trade and regional tensions.
“For now, trade and geopolitical blips, appear to be dips to buy into the rally, rather than a sea change in sentiment.
“That can only come if a second wave of Covid-19 outbreak sweeps developed countries, or vaccine disappointments mount up, ” said Halley.
Stocks were mostly up, with the healthcare and gloves once again in the spotlight.
With CIMB Research upgrading Top Glove to RM16.50 on the back of the stock again powered up, gaining RM1.04 to end the day at RM12.86.
Naturally, the other rubber glove stocks and healthcare stocks followed suit, and most closed with new highs for the day.
The construction sector is starting to warm up, and the related players are starting to attract interest.
CIMB Investment analyst Sharizan Rosely said the high speed railway (HSR) news are getting warmer.
“Sources are slowly revealing new details on the HSR project with the latest being the RM68bil estimated total development cost, including civil works. The imminent appointment of a new CEO of MyHSR may signal a potential re-launching of the HSR project in the short-term and inclusion into the 12th Malaysia Plan, ” said Sharizan.
He recommended to accumulate HSR stocks ahead of the Economic Recovery Plan and the HSR review deadline, which falls on May 30.
As of midday, some 3.9 billion shares were done on value of RM2.63bil. Market breadth remain broadly positive
CGS-CIMB Head of Retail Research Kong Seh Siang felt that the current uptrend is likely to reverse soon.
Last Friday, the FBM KLCI saw its first loss in nine days, ending the week at 1,436.67, down 15.35pts or 1.06%.
Trading volume fell to 6.7 billion shares last week.
He remained cautious about the current uptrend and believed taking profit on recent gains may turn out to be a great idea.
“Buy and hold activities plans ought to be put on hold for now, ” he said.
“While we expect more weakness ahead, we cannot discount that the index may still inch higher to test the 1,455 to 1,460 levels again in the near term.
He said that should the FBM KLCI fill the May 19 gap of 1,410 to 1,419, that would enhance his confidence that the index has indeed turned and it is likely to head lower in the weeks ahead.
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