The Malaysian stock market was up less than two points on Wednesday, but that was enough to put an end to the market's modest two-day losing streak that had cost it 25 points or 3.5 percent. The Kuala Lumpur Composite Index is closing on resistance at 970 points, and now investors are optimistic that the market can break through at the opening of trade on Thursday.
The global forecast for the Asian markets is generally upbeat, despite weak GDP numbers out of the United States. Financial stocks also could be in focus following a shakeup at the top of Bank of America. The European markets finished sharply higher, as did the U.S. markets - and the Asian bourses are predicted to follow that lead.
The KLCI finished barely higher on Thursday, thanks to a slight increase among the financials - although the gains were limited by modest declines among the plantation stocks and the industrial issues.
For the day, the index was up 1.76 points or 0.18 percent to close at 967.46 after trading between 952.37 and 969.03. Volume was 1.051 billion shares worth 931.534 million ringgit. There were 396 gainers and 196 decliners, with 182 stocks finishing unchanged.
Among the gainers, UEM Land rose 6.1 percent and MRCB was up 6.8 percent, while KNM, SAAG and Talam also finished higher.
Bucking the trend, Sime Darby lost 0.78 percent and IOI Corp shed 0.49 percent, while Tenaga, Bumiputra-Commerce and Maybank also finished in the red.
Wall Street offers a positive lead as stocks turned in a strong performance over the course of the trading day on Wednesday, with the major averages more than offsetting the losses posted in the two previous sessions. The strength in the markets came as investors shrugged off some weak GDP results and mulled over remarks from the Federal Reserve.
Before the opening bell, the Commerce Department released a report showing that GDP decreased at an annual rate of 6.1 percent in the first quarter, better than the 6.3 percent drop in the previous quarter, but considerably worse than the 4.7 percent decline economists had anticipated. A steep drop in private inventories played a big part in the sharper than expected contraction in GDP, however, with the drop in inventories subtracting 2.8 percentage points from first quarter GDP.
The substantial decline in inventories helped to offset a rebound in consumer spending, which rose by a bigger than expected 2.2 percent in the first quarter after falling by 4.3 percent in the fourth quarter and 3.8 percent in the third quarter.
Traders also kept a close eye on the Federal Reserve, which announced its latest decision on interest rates following a two-day monetary policy meeting. As expected, the Fed left its target range for the federal funds rate at 0 to 0.25 percent and reiterated that it expects that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
The Fed's accompany statement was largely unchanged from the statement issued following its March meeting, although it did acknowledge that the pace of contraction in economic activity appears to be somewhat slower.
On the corporate front, Bank of America (BAC) was on investors' minds during the session as Chairman and Chief Executive Ken Lewis faced severe shareholder anger at the bank's annual meeting. After the bell, Lewis was removed as chairman but retained the title of CEO.
The major averages moved off their best levels of the day going into the close but remained firmly positive. The Dow closed up 168.79 points or 2.1 percent at 8,185.73, the NASDAQ closed up 38.13 points or 2.3 percent at 1,711.94 and the S&P 500 closed up 18.48 points or 2.2 percent at 873.64. With the upward moves, the NASDAQ ended the session at its best closing level in nearly six months, while the Dow set a more than two-month closing high and the S&P 500 set a three-month closing high.
In economic news, Malaysia's central bank kept on Wednesday its key interest rate unchanged at 2 percent after cutting the rate in the previous three consecutive rate-setting sessions. Economists had expected the bank to lower the rate by another 25 basis points to 1.75 percent.
The Malaysian economy is expected to record a marked contraction in the first quarter of 2009 driven by sharp declines in exports and industrial production, the Bank Negara Malaysia said in a statement accompanying the monetary policy decision.
The central bank said the current economic conditions are expected to prevail until the second quarter of the year, although there are some indications that the pace of decline in economic activity has moderated.
The bank expects the domestic economy to improve in the second half of 2009, supported by stabilization in global economic conditions and the larger impetus from the implementation of the fiscal stimulus measures.
Malaysia's inflation decelerated to 3.5 percent in March, and is expected to moderate further amid subdued demand conditions and lower external price pressures, the central bank said.
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