Bursa fails to sustain uptrend

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KUALA LUMPUR: While most Asian markets continued to rise, the Kuala Lumpur Composite Index (KLCI) ended the day marginally lower, shedding 0.38 of a point or 0.04% to close at 877.92 points yesterday.

The main driver that pushed the market up by 21.48 points or 2.51% on Monday — which was the rising price of commodities — came down yesterday despite the ringgit appreciating further. The June delivery of crude palm oil (CPO) fell below the RM2,000 level to close at RM1,980, which is RM50 below Monday’s closing.

The ringgit strengthened to RM3.6263 per dollar as of 6.31pm from RM3.6408 per dollar a day earlier, according to Bloomberg data.

The price of crude oil dropped 0.8% to US$53.36 (RM193.16) a barrel on the New York Mercantile Exchange as at 6.32pm from US$53.80 per barrel a day before. It hit the lowest of RM39.72 a barrel on Feb 18, 2009.

The head of Jupiter Research Pong Teng Siew said the commodities and stock market rally, mainly boosted by the US government’s latest plan to clear bad bank assets and larger-than-expected rise in existing home sales in the US, is likely to be shortlived due to the absence of fundamentals.

“Indicators of industrial activity such as those in the manufacturing sector still remain weak. The rally is based purely on sentiment; I think it will end around early next month,” he said.

Most Asian bourses extended their gains yesterday. The markets across the region responded positively to the measures taken by the US government to remove toxic assets from the banking system. Leading the charge was the Hang Seng Index which ended 462.92 points higher or 3.4%.

Other notable gainers were Singapore’s Straits Times Index which closed 42.26 points or 2.5% higher and Nikkei which gained 3.3% to close 272.77 points higher.

The MSCI Emerging Markets Index climbed the most this year, rising more than 20% from its lowest on Oct 27, 2008 and erasing losses for 2009, on US plans to buy as much as US$1 trillion of toxic assets.

The KLCI lost all its gains during the morning trading session due to heavyweights closing lower later in the day. Malayan Banking Bhd shed 18 sen to close at RM4.40, Sime Darby trimmed five sen to close at RM5.80 and Tenaga Nasional Bhd lost five sen to close at RM6.20.

Pong described the current global equities rally a “bear market rally” and the US government’s effort to boost lending was unlikely to be smooth sailing. Traders and analysts were sceptical on the reasons behind the recent commodities rally, doubtful whether the current economy was strong enough in the short term to justify the gains.

“Take CPO, for example, the main factor driving up the price currently is the weakening US dollar,” said a trader. “I don’t see any recovery in the global economy that will help boost commodity prices now in general.”

This article appeared in The Edge Financial Daily, March 25, 2009.