It was reported that there would be a sharp rebound in commodities with the implementation of stimulus measures by central banks such as the interest rate cuts by China and the European Central Bank (ECB), which is expected to increase liquidity in equities markets.
Vice-president and head of retail research of Affin Investment Bank, Nazri Khan, said stimulus measures from global central banks following a burst of activities from the ECB, Bank of England and People’s Bank Of China will drive the FBM KLCI higher.
The ECB cut the benchmark interest rate to a record low on Thursday. China also cut its key lending rate on Thursday.
The Bank of England also began its stimulus drive, announcing on Thursday that it would restart buying bonds which market observers expect to drive liquidity in the markets.
Central banks in major economies are beginning with aggresive stimulus measures in view of the faltering global economy.
Nazri said near-term resistance for the FBM KLCI comes in at the 1,620 level while support is pegged at the 1,600 level.
“As for the local fundamentals, we expect several investment themes in the new third quarter which includes Budget 2012 and election-driven construction news flow, continuous capex spending in the oil & gas sector, upcoming mega initial public offerings (IPOs), merger talks in smaller banking stocks and dividend play in consumer and telco stocks,” he said.
The local bourse ended the week on a strong note, with the FBM KLCI at a fresh new high in spite of the weakening performance in regional markets as investors were not so excited by the ECB’s move to cut interest rate to a record low.
“Although we agree interest rate cuts may have a limited impact on the aggregate economy, the short-term boost to the stock market is positive due to its repercussion on investors who now expect a new round of coordinated global monetary stimulus measures to jumpstart the struggling global economy,” Nazri said.
He said there is speculation that European equities may play catch-up as the ECB implements a zero-rate policy and follow the US Federal Reserve with a quantitative easing programme.
On a Friday-to-Friday basis, the benchmark FTSE Bursa Malaysia KLCI rose 21.40 points to an all-time high of 1,620.55 from 1,599.15 last week.
The Finance Index increased 196.74 points to 14,437.72 from 14,240.98 last Friday.
The Industrial Index gained 24.49 points to 2,871.96 from 2,847.47 last Friday.
The Plantation Index soared 273.11 points to 8,757.17 from 8,484.06 last Friday.
The FBM Emas Index surged 168.61 points to 11,086.25 from 10,917.64 last Friday.
The FBM ACe Index went up 44.47 points to 4,399.17 from 4,354.7 last Friday.
The FBM Mid 70 Index added 26.367 points to 12,183.05 from 11,919.38 last Friday.
The FBM 100 Index climbed 161.52 points to 10,904.49 from 10,742.97.
The weekly volume decreased to 5.671 bilion shares worth RM7.734 billion, from 6.163 billion shares valued at RM8.988 billion last week.
Main Market volume declined to 3.603 billion shares worth RM7.427 billion, from 4.195 billion shares worth RM8.717 billion last week.
Volume on the ACE Market contracted to 1.36 billion shares worth RM185.529 million, from 1.519 billion shares worth RM198.801 million last week.
Warrants jumped to 694.301 million units worth RM113.357 million, from 433.354 million units valued at RM63.344 million last week.