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Saturday, March 28, 2009

KLSE 26 Mar 2009 >>> Mild profit-taking after recent rally

Mild profit-taking activities set in on Friday for the local bourse and much of the region after recent strong gains prompted by Wall Street’s rally.
The decline in trading volume also suggests investors were turning more cautious on the market’s next move, after the recent gains. Wall Street’s further rally on Thursday led Malaysian stocks to open higher on Friday, with the KLCI rising as much as five points in the opening minutes.
However, the index slipped into negative territory by midday, and ended the day almost unchanged at 885.4. Market breadth was negative with declining stocks beating advancing ones by a 5-to-4 margin at the close.

Trading volume fell from 569 million to 455 million shares. Actively traded stocks include KNM, ASB, Resorts, Gamuda, MRCB IOI Corp and Muhibbah. Major gainers include Allianz, KL Kepong, Tanjong plc and Sime Darby. Losers include IJM and Bursa Malaysia. Investors appear content to lock in gains ahead of the weekend, and await further clues from Wall Street.

The Dow Jones Industrials Average has surged 21% from its earlier 12-year lows, making March 2009 the best month for Wall Street in 35 years.

The rally was prompted by the US toxic asset purchase plan and signs that a bottoming for the US economy may not too far, given the recent spate of better than expected economic readings, especially on the housing market and durable goods orders. Durable goods orders rose 3.4% in Feb 2009 – the first rise since July 2008. The US housing market – the heart of the current crisis – is finally showing signs of stabilization after months of relentless declines. Sales of existing homes in Feb 2009 rose by a more than expected 5.1% pace last month, while housing starts surprisingly rose 22.2%. Sales of new homes also rose in Feb 2009 for the first time in seven months, rising 4.7%.

Whether Wall Street’s rally continues remain to be seen, as much will depend on more economic data confirming a bottoming of the US economy. But with Wall Street having chalked up such sizable gains so far, some profit-taking activities can also be expected.

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