KUALA LUMPUR: The FBM KLCI pared down initial gains yesterday and slipped below the 1,490 point level, while regional markets chalked up strong gains as coordinated liquidity action by the major central banks boosted investor sentiment.
Analysts said the sentiment on the local market remains bullish for now, with the good run expected to sustain until the Lunar New Year in 2012.
Asian markets rose after the US Federal Reserve, the European Central Bank and the central banks of Canada, the United Kingdom, Japan and Switzerland said on Wednesday they would lower the cost of existing dollar swap lines by 50 basis points from Dec 5, and arrange bilateral swaps to provide liquidity for other currencies, Reuters reported.
The FBM KLCI closed 13.16 points higher at 1,485.26, lifted by gains at banking and select blue chips. The index had earlier risen to its intra-day high of 1,502.53.
On the regional markets, Hong Kong’s Hang Seng Index surged 5.63% to 19,002.26, Taiwan’s Taiex rose 3.98% to 7,178.69, South Korea’s Kospi gained 3.72% to 1,916.18, the Shanghai Composite Index added 2.29% to 2,386.86, and Japan’s Nikkei 225 was up 1.93% to 8,597.38 and Singapore’s Straits Times Index rose 2.2% to 2,761.88.
Dr Nazri Khan, Affin Investment Bank Bhd vice-president and head of retail research, said, overall, the market is bullish now.
“We see a good reliable bottom at 1,310, second bottom near 1,400, now all set for 1,530 by year-end, and 1,700 by Chinese New Year … we are going for a good run,” he said.
Nazri said the unprecedented move to lower the cost of existing dollar swap lines clearly demonstrates prevailing central banks and policymakers’ recognition of the need to undertake more aggressive monetary policy actions to avert a potential collapse of the global financial system — where money markets as well as credit markets have recently faced elevated levels of stress not seen since Lehman Brothers failure.
He said this is highly positive in not only greatly reducing banks’ liquidity risk, but importantly, acting as a major confidence booster to financial markets that central banks are prepared to take over the role of governments or politicians to address the problematic eurozone sovereign debt strain.
However, Nazri added that the move by global central banks coming into a consortium to provide a greater dosage of “morphine” to save the ailing patients will not resolve the underlying eurozone problem.
“The crux of the issue lies in the uncontrolled fiscal spending over the years that has resulted in overly indebted and leveraged governments who are facing insolvency risk (by extension of banks holding the weak sovereign bonds, their solvency is also in question).
“Clearly, a re-acceleration in global liquidity through the latest move and quantitative easing (UK and Japan) will stoke renewed inflationary pressure,” he said.
Among the banking stocks, Hong Leong Bank Bhd rose 32 sen to RM10.78, Public Bank Bhd added 20 sen to RM12.74, Hong Leong Financial Group Bhd up 18 sen to RM11.58, RHB Capital Bhd added 11 sen to RM7.42, Malayan Banking Bhd nine sen to RM8.39, CIMB Group Holdings Bhd eight sen to RM7.22 and AMMB Holdings Bhd up four sen to RM5.98.
Other gainers included British American Tobacco (M) Bhd, Nestle (M) Bhd, Dutch Lady Milk Industries Bhd and JobStreet Corp Bhd.
Among the losers, Genting Bhd fell 26 sen to RM10.70; Lafarge Malayan Cement Bhd lost 24 sen to RM6.70, MSM Malaysia Holdings Bhd down 19 sen to RM4.81, Axiata Group Bhd lost 17 sen to RM4.93, Fraser & Neave Holdings Bhd slipped 14 sen to RM18.02, IJM Corp Bhd, Tan Chong Motor Holdings Bhd and Malaysia Airports Holdings Bhd fell 11 sen each to RM5.80, RM4.24 and RM6.08 respectively, while Southern Steel Bhd shed 10 sen to RM1.98.
This article appeared in The Edge Financial Daily, December 2, 2011.
