Confidence returns to most markets

Wednesday October 3, 2007 (STAR)

PETALING JAYA: Investor confidence appears to have returned in most stock markets after the Dow Jones Industrial Average hit a record 14,088 points on Monday.
This is following suggestions from former US Federal Reserve chairman Alan Greenspan and Citigroup Inc that the credit slump might be coming to an end.
The Hong Kong and Singapore bourses continued to reach all-time highs yesterday, with the Hang Seng Index closing up a whopping 3.9% to 28,200 points and the Straits Times Index jumping more than 1% to 3,794 points.
The KL Composite Index (KLCI), meanwhile, rose for the fifth consecutive trading day, surging 21.7 points, or 1.6%, to 1,368.7 points while the second board index gained 0.34-point to 106.28.
Market breadth was healthy, as gainers outnumbered losers 605 to 253 while 284 counters were unchanged. About 1.6 billion shares valued at some RM2.9bil changed hands.
Buying was selective and based on themes like oil and gas, plantation, construction and property-based companies.


Among the top gainers were IOI Properties Bhd and Malaysian Airline System Bhd, which jumped RM1 and 75 sen to RM13.90 and RM5.30 respectively.
MIMB Investment Bank head of equity research Pong Teng Siew said liquidity had returned to the market although not broadly, thanks to buying by the local funds.
Meanwhile, he said, markets in Brazil, India and China continued to attract the interest of foreign funds.
“Asia has little exposure to the US sub-prime mortgage market and still has great growth stories,” he said, noting that credit growth remained strong in Asian countries. He said their monetary systems were insulated from the US' credit woes compared with European banks, which had a greater degree of exposure.
Pong is optimistic that the KLCI looked set to breach a new high of more than 1,400 points by year-end.
Nonetheless, investors should exercise caution towards year-end, as fund managers were unlikely to maintain the buying momentum for long, he said.
“Fund managers may take a break and not be overly aggressive as it would make their job of outperforming in the following year more difficult,'' he added.
OSK Investment Bank head of research Kenny Yee said sentiment had definitely improved despite indications of lower earnings from international investment banks.
“Things are more visible and out in the open. The element of uncertainty has been lifted,” he said, adding that investors had already factored in the losses.
“There are no more surprises. As long the US economy does not fall into a recession, the situation is anticipated to remain stable,” Yee said.
TA Securities head of research Kaladher Govindan concurred, saying that market perception had changed as investors were now relieved that the sub-prime issue was not going to delay economic growth in the US.
“They can see the magnitude of the problem and expect a recovery soon,” he said, adding that it was only a matter of time that the KLCI would reach a new high like other regional bourses.
TA, he said, was maintaining its 12-month target of 1,520 points.