KLCI rebounds after recent falls

Share prices on Bursa Malaysia rebounded on June 19, after four days of declines. Investors took comfort in economic data that showed the US economy continued to be on the road to recovery. The local market’s performance also mirrored that of most regional bourses, although gains were generally muted as investors globally have turned more cautious in the wake of the recent stronger bouts of profit-taking.

Wall Street charted modest overnight gains as the index of US leading economic indicators rose in May for a second consecutive month, rising 1.2% after a 1.1% gain in April. US manufacturing activities in the mid-Atlantic area contracted in June for the ninth consecutive month, but much less than expected. The Philadelphia Federal Reserve's business activity index came in at negative 2.2, its smallest negative reading since Sept 2008, and compared with negative 22.6 in May 2009.

These indicators suggest the recession may be nearing the end, although that is already a foregone conclusion and have been mostly factored into stock prices by investors after the recent three-month rally. However, the road to recovery may not be smooth and post-recovery growth is likely to be slow. Thus, more economic evidence will be needed to sustain the current momentum.

On June 19, the KLCI was in positive territory throughout the day, rising as much as 11.4 points in the afternoon, before ending 5.1 points higher at 1,059.5. Despite the index’ gains, market breadth was mixed, with an almost equal number of advancing and declining stocks. Trading volume was relatively low by recent standards – at 1.35 billion shares. The most actively traded stocks include Compugates, KNM, UEM Land, Tebrau, Mulpha, Scomi, Lion Corp, MRCB and SAAG. Major gainers include Bumiputra-Commerce, Nestle, Sime Darby, Parkson and CBIP. Losers include BAT, SP Setia, Tanjong plc and Measat.

With global stock markets having rallied so strongly earlier and now showing signs of fatigue, investors are understandably becoming more cautious. Investors are likely to remain cautious and will await further economic clarity, which will help determine the sustainability of recent gains.