Bulls to stage breakout attempt

Trading on the Malaysian stock market early this week is poised to be brisk, as bulls attempt to break out from bear territory.
For the first time in weeks, global equties have had a slew of good news to cling on to, ranging from reports that the Group of Seven (G7) will intervene in the Yen, which Japan has managed to stabilise some of its nuclear reactors, the UN sanctioned action in Libya.

On the domestic front, investors' risk appetite may have gone up by a notch, following the reports that Sarawak state election will be called by as early as next month.

"The unexpected G7 intervention to weaken the yen, improved sentiment in the global equity markets as well as cut fears about Japan sinking into recession," said an analyst, adding that the move also minimised possibilities of unwinding of yen carry trades as funds could scramble to minimise losses from a stronger yen.

The Japanese yen has soared to a record high of 76.250 yen to the dollar after the country suffered one of the worst natural disasters since 1923, which has left more than 20,000 people dead or missing. The disaster also damaged several nuclear plants.

A stronger yen makes it more difficult for Japan's export-driven economy to recover by making Japanese goods more expensive on the world market.

As part of the effort to stabilise the currency, it was reported that more than US$25 billion (RM76 billion) was pumped in by the world's richest nations, in what is being described as the first such co-ordinated action in more than a decade.

The US Federal Reserve, European Central Bank, Bank of Japan and the Bank of England have jointly intervened in the currency markets.

Ripples of the Friday's action by the G7 nations, helped push the FTSE Bursa Malaysia KLCI to its first close above the psychological 1,500 level in six trading days.

The 30 stock benchmark index closed the week higher by about 0.7 per cent to 1,503.89, its highest weekly close in two weeks.

The ringgit closed at RM3.0530 against the US dollar on Friday, as opposed to Thursday's close of RM3.0535 against the greenback.

Improvements in the ringgit against the US currency coincided with an increase in foreign participation in the local equity market.

Last Friday, foreigners bought some RM425.67 million worth of stocks, against the RM343.41 million they spent in buying shares on Thursday.

As such, their participation in the market on Friday increased to 29.87 per cent from the 26.72 per cent, according to the information obtained from Bursa Malaysia.

Affin Investment Bank head of research Nazri Khan, in a recent news report, expects the index to hit as high as 1,520 this week, and added that those companies in the steel and timber sectors could be the main beneficiaries.

Glove makers may trade more actively due to weak rubber prices, while DRB Hicom Bhd, which saw the Employees Provident Fund buy more than four million of its shares last week, may trade more actively after the reports emerged that it has bid for Pos Malaysia Bhd.

Likewise, Scomi Group Bhd begins to come into focus after a weekend report suggested that it is the front runner in securing a US$782 million (RM2.38 billion) monorail contract in Brazil. - By Goh Thean Eu of btimes.com.my