KUALA LUMPUR (June 1): Late buying interest pushed the FBM KLCI up 1.75% in the last 10 minutes of the trading day on Tuesday (May 31), ahead of changes that will take place in the MSCI’s equity indices as part of its bi-annual review.

The 11th-hour rally turned the Malaysian benchmark index into one of Tuesday’s best performers in the Southeast Asia region, as it spiked 1.75% or 27.08 points to 1,570.10, its highest in almost four weeks.

Trading volume among the component stocks rose to a six-year high of 745.9 million — with the previous highest seen at 834.2 million on May 31, 2016, which was also the MSCI's mid-year review deadline that year. 

Trading value or turnover, meanwhile, rose to RM3.78 billion — the highest daily value recorded since May 29, 2020, when it clocked in at RM4.29 billion. The latest turnover is also about four times the last five year's average. 

In SEA, Thailand’s SET index was up 0.59% and Indonesia’s Composite Index closed up 1.58%. Singapore’s Straits Times Index, meanwhile, fell by 0.2%.

Across Asia-Pacific, Hong Kong’s Hang Seng jumped 1.33% as China’s Shanghai Stock Exchange Composite Index advanced 1.19%, while the Shenzhen Composite Index spiked 1.92%, and South Korea’s Kospi Index rose 0.61%. However, Japan’s Nikkei 225 ceded 0.33%.

At last close, over 73% or 22 of the KLCI-component stocks closed higher, while six counters closed lower and two were unchanged.

At a glance, five out of six banking component stocks ended higher on Tuesday, namely: Malayan Banking Group Bhd (added 12 sen or 1.34% to RM9.10), CIMB Group Holdings Bhd (added 10 sen or 1.98% to RM5.15), Public Bank Bhd (added 14 sen or 3.05% to RM4.73), RHB Bank Bhd (added 17 sen or 2.88% to RM6.08) and Hong Leong Financial Group Bhd (added 72 sen or 3.7% to RM20.18); Hong Leong Bank Bhd’s shares dropped two sen or 0.09% to settle at RM21.10.

Gains were also seen across Petronas-linked stocks, which fuelled the market bellwether’s strong performance on Tuesday.  Petronas Dagangan Bhd’s share price closed RM1.64 or 7.84% higher at RM22.56, while Petronas Gas Bhd’s share went up 66 sen or 3.97% to settle at RM17.28; Petronas Chemicals Group Bhd gained 26 sen or 2.6% to settle at RM10.26.

MSCI’s website said on May 12 that as part of its May 2022 semi-annual index review, the changes in its equity indices will take effect from the close of trading on May 31. The second review typically turns effective on Nov 30 each year.

It should be noted that MSCI’s report dated April 29 this year showed that the MSCI Malaysia Index had 35 constituents, with finance being the largest weighted sector, at 39.33%.

Some Malaysian listed companies are also components of other MSCI indices. For example, Public Bank Bhd, which is one of the top 10 constituents of the MSCI Asean Index.

Malacca Securities Sdn Bhd's head of research Loui Low is of the view that the FBM KLCI's jump was due to what he termed “broad-based rebalancing” as part of the MSCI indices review.

A head of research, who also opined that the MSCI rebalancing contributed to the 11th hour jump in the FBM KLCI, told The Edge that the window dressing was due to some funds having to close their books on May 31, based on their fiscal year end.

“There is nothing really fantastic [with the last-minute buying]. The KLCI is still range-bound following the decline from the 1,600 level [in March]. Tomorrow, we may see a drop [in the index as] fundamentally, nothing really changed,” the head of research said.

Similarly, Inter-Pacific Securities head of research Victor Wan observed that window-dressing activities among banking stocks were the major reason for the last-minute push seen in the benchmark index.

Among the 30 Bursa indices, 26 ended Tuesday higher, while only four trended lower. Bursa Malaysia's Financial Services index rose the most in percentage terms among the bourse indices, after climbing 1.86% to 16,910.7.

Rakuten Trade Sdn Bhd equity research vice-president Thong Pak Leng, meanwhile, said the last-minute push in the benchmark index was also due to foreign buying.

Thong also believed that the index, which is currently trading at an attractive valuation, still has room to climb and may eventually catch-up with some regional peers, should the country's fundamentals remain intact.