Monday, August 20, 2007


Malaysian shares ended broadly higher Monday, in line with the rebound in regional markets after the U.S. Federal Reserve took steps Friday to calm credit markets by cutting its discount rate by 0.5%. The weighted Composite Index of 100 blue-chip stocks rose 4.4%, or 51.84 points, to 1243.39. Volume was heavy with 1.45 billion shares changing hands. Gainers beat losers 1014 to 55. Local funds were net buyers in today's market, triggering fresh buying interest from retail investors. Among the sectors that gained most significantly were the construction, banking and property sectors but some intermittent profit-taking was visible. There's no certainty in this market. All eyes will be on what happens in the U.S. tonight. A large part of today's gains were supported by value hunting in oversold blue chips and government-linked companies by local funds, but this could very easily reverse if there are declines on the DJIA tonight. KLCI's downside to be limited to 1238 (32.8% retracement) while upside may be capped at 1266 (50% retracement). The possibility of the appearance of a multistage market decline in the nature of a full-blown bear market lasting several months still cannot be dismissed yet. There is sufficient domestic liquidity for relative calm to emerge fairly quickly locally in the capital markets. But do not count on the return of foreign funds that would provide that extra dose of liquidity that would enable the return of bull market conditions.


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