KLSE drift sideways as oil surhes past $63

Shares trading on the Bursa Malaysia were somewhat directionless Wednesday. Price movements for most counters were range bound as investors treaded cautiously ahead of Malaysia's 1Q09 gross domestic product (GDP) numbers, due to be released later in the evening.The KL Composite Index opened in positive territory, bolstered by Wall Street's strong gains overnight.

However, the benchmark index soon lost traction and slipped into the red as the day progressed. Market breadth was also ambivalent, swinging from positive to negative throughout the day. At the close, the number of gaining and losing counters was almost at par.Investors are cautious on the immediate outlook for the local bourse.

Stocks have rallied strongly over the past two to three months, with the KLCI gaining almost 20% in the year to date. As a result, valuations for the broader market, and especially big blue chip stocks, are appearing stretched. Corporate earnings for 1Q09 released so far have been, by and large, weak. Most management guidance remains cautious although many pointed to the improving external environment as a positive sign. That may be true. But share prices may well continue to drift until the improved outlook translates into better earnings.

The KLCI ended four points lower at 1,047.7 points. Some of the bigger losers include Tanjong plc, PPB, MISC-F, Top Glove and Sime Darby. At the other end, shares for BAT, BHIC and KL Kepong were among the big gainers for the day.About 1.44 billion shares were traded. Compugates and Sino Hua-An were two of the most heavily traded stocks, by far. Other actives were KNM, SAAG, E&O and Resorts World.Shares for Genting and Resorts World came under some selling pressure after their recent surge. Both companies declined to comment on news reports suggesting the gaming group may take up MGM Mirage's stake in its Macau casino venture.

Oil rose to hit a six-month high above US$63 a barrel on May 27 after OPEC kingpin Saudi Arabia said the global economy had strengthened enough to cope with oil at US$75-US$80 a barrel. Speaking ahead of the Organization of the Petroleum Exporting Countries' meeting in Vienna on May 28, Saudi Oil Minister Ali al-Naimi said oil prices would continue to rise, recovering from lows near US$32 at the turn of the year. "The price rise is a function of optimism better things are coming in the future," Naimi told reporters in Vienna.

"We see offshoots of recovery," he added. "Demand is picking up, especially in Asia." The minister said OPEC on May 28 did not need to change its output policy, which has already seen the group agree to remove 4.2 million barrels per day of oil from the market in a bid to shore up prices battered by recession.

US crude oil for July delivery rose to touch US$63.45 a barrel, the highest level since mid-November, before easing slightly to trade up 78 cents at US$63.23 a barrel by 0845 GMT. London Brent crude rose 81 cents to US$62.05.