KUALA LUMPUR (Jan 29): The FBM KLCI rose 16.6 points or 0.9% today, the highest level seen since September 2014.

At 5pm, the benchmark index finished at 1,870.52 points, after three billion shares worth RM2.49 billion were traded across the board. The last time the index closed near this level was on Sept 10, 2014, when it ended at 1,870.85 points.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew told theedgemarkets.com that the “unusual" rally in the KLCI today was led by mainly banks and blue chips.

“Investors are buying on expectations that the overnight policy rate (OPR) hike is expected to boost the banks’ interest margins. But there is no reason to be wildly bullish on the banks, the rate hike is actually a make up for lost grounds, instead of creating gains for the banks,” he said.

Pong went on to say that he expects limited beneficial impact on banks, as the rate hike would merely restore instead of lift margins, unless progressive rate hikes are implemented following this, given interbank rates and deposit rates have risen over the past few months, ahead of the 25 basis points (bps) rate hike announced by Bank Negara Malaysia (BNM) on Thursday (Jan 25).

Also, not all bank loans have flexible rates, he said. Citing hire purchase loans which have fixed rates as an example, he said banks will see a margin squeeze in this segment as interest rates for these loans were locked in, while deposit rates go up, leading to higher funding costs, Pong explained.

“Perhaps investors are buying on expectations that there will be several OPR hikes this year, but I think the central bank will take its time with its hike. This round of OPR hike is mainly to correct the OPR drop in July 2016, which led to a huge drop in the ringgit then,” Pong added.

At 5pm, Public Bank Bhd gained 60 sen, Hong Leong Financial Group Bhd and Hong Leong Bank Bhd both gained 46 sen respectively, while Malayan Banking Bhd (Maybank) edged 12 sen higher.

Market breadth, however, was largely negative as losers outstripped gainers on a ratio of 623-to-370 stocks, while 396 counters were flat, mainly dragged by profit-taking activities.

Oil and gas stocks Sumatec Resources Bhd, UMW Oil & Gas Corp Bhd (UMW-OG), and Sapura Energy Bhd dominated Bursa’s most actively-traded list today, though all three closed in the negative territory. 

Asian shares elsewhere closed mixed today, with Japan’s Nikkei 225 slipping 0.01%, Hong Kong's Hang Seng Index down 0.56%, while the Korean Kospi rose 0.91% to its all-time closing high, according to Reuters.