One day after barely ending the five-day winning streak that saw it collect more than 35 points or 4 percent, the Malaysian stock market turned right back to the upside again on Wednesday. The Kuala Lumpur Composite Index is closing on resistance at 880 points, and now analysts suggest that it could crack that barrier in Thursday's trade.
The global forecast for the Asian markets is fairly upbeat, thanks to some better than expected economic data out of the United States. The financial stocks, after experiencing a mild correction in the previous session, are expected to resume their upward movement to provide support for the markets. The European markets finished higher across the board, as did the U.S. markets - and the Asian markets are expected to do the same.
The KLCI finished barely higher on Wednesday, as mild gains among the industrial stocks and the financial issues were effectively cancelled out by selling among the plantations.
For the day, the index added 0.89 points or 0.10 percent to close at 878.81 after trading between 871.84 and 879.04. Volume was 362.985 million shares worth 671.500 million ringgit. There were 246 decliners and 200 gainers, with 203 stocks finishing unchanged.
Among the actives, TM International, Asia Bioenergy Tech, Tenaga and IOI Corp all finished lower, while Resorts World, KNM Group, Sealink International, Sime Darby, Bumiputra-Commerce and MISC all ended to the upside.
The lead from Wall Street is positive as stocks experienced considerable volatility over the course of the trading session on Wednesday, with the major averages eventually ending the session firmly in positive territory. The choppy trading came as traders digested some strong economic data combined with weak demand for a U.S. treasury auction.
Some initial buying interest was generated by a report from the Commerce Department revealing that durable goods orders unexpectedly showed a substantial increase in the month of February after falling in each of the six previous months. The report showed that durable goods orders jumped 3.4 percent in February after falling by a revised 7.3 percent in January. Economists had been expecting durable goods orders to fall by 2.5 percent compared to the 4.5 percent decrease that had been reported for the previous month.
The markets saw some further upside after the Commerce Department released a separate report showing an unexpected increase in new home sales in the month of February. This marked the latest in recent string of positive housing market data. The Commerce Department said that new home sales rose 4.7 percent to an annual rate of 337,000 in February from an upwardly revised January rate of 322,000. The results surprised economists, who had been expecting sales to fall to 300,000 from the 309,000 originally reported for the previous month.
Stocks were unable to sustain the upward move, however, as investors remained skeptical that the better than expected data signals a turnaround for the economy. After hovering in positive territory for much of the morning, stocks showed a substantial turnaround over the course of the afternoon amid a negative reaction to the release of the results of the Treasury Department's auction of $34 billion worth of five-year notes. The auction drew a yield of 1.849 percent and a bid-to-cover ratio of 2.02.
With the bid-to-cover ratio, an indicator of demand, coming in below the 2.21 from the Treasury's previous auction of $32 billion in five-year notes last month, the auction results raised some concerns about demand for U.S. government debt. The major averages subsequently pulled back well off their highs and into the red.
Nonetheless, stocks moved back to the upside going into the close, lifting the major averages back into positive territory. The Dow closed up 89.84 points or 1.2 percent at 7,749.81, the Nasdaq closed up 12.43 points or 0.8 percent at 1,528.95 and the S&P 500 closed up 7.63 points or 1 percent at 813.88.
In economic news, Malaysia's leading index declined 0.4 percent in January to 157.3 points, the Department of Statistics said on Wednesday. The six-month smoothed growth rate decreased further to minus-3.6 percent in January from minus-3 percent in December.
Meanwhile, the coincident index, a measure of current economic activity, slipped 1.1 points to 113.7 points in January. The six-month smoothed growth declined further to minus-10.7 percent from minus-9.7 percent in December.
The statistical office said the continuing weakness in the six-month smoothed growth rates of the leading and the coincident index indicate that the economy will continue to slow down in the months ahead.
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