Written by InsiderAsia
Sunday, 22 November 2009 17:31
STOCK prices on Bursa Malaysia were mixed last week, following the weaker performance on Wall Street and most regional bourses.
Nonetheless, the FBM KLCI managed to eke out a marginal gain to rise for the third consecutive week. The index added 3.4 points or 0.3% to close at 1,274.4 points. This brings its total gains to 31.2 points over the last three weeks.
For the local bourse, the highlight was the relisting of Maxis, Malaysia's largest cellular operator, last Thursday.
Maxis ended the week at RM5.37, up from an initial public offering (IPO) price of RM4.75 for the public and RM5 for institutions. The relisting spurred trading volume on Bursa Malaysia to swell to 1.35 billion shares last Thursday, with Maxis accounting for 23% of the total. Most expect Maxis to boost trading liquidity and generate greater interest from foreign investors over the longer term.
The local earnings season is in full swing, and results so far have mostly exceeded expectations, especially for the smaller and mid-cap companies. More results are expected this coming week, as the earnings season draws to a close.
Nonetheless, external developments and ongoing concerns over the strength of the global economic recovery continue to dominate, and affected global equity markets. Investors are turning more cautious as stock prices reached higher levels after a nearly uninterrupted eight-month long rally, fuelled by low interest rates and "cheap money" from carry trades.
The week had initially got off to a good start. Gains on Wall Street for the second straight week and a number of positive economic data, noticeably outside the US, buoyed investor confidence.
Japan's economy grew at the fastest clip since the first quarter of 2007 (1Q07) in the last quarter, expanding 1.2% (or an annualised pace of 4.8%) from the immediate preceding quarter. In the preceding week, the euro zone also released numbers showing that its member countries collectively emerged from recession, growing by 0.4% in the third quarter of the year.
In the US, Monday saw the release of data showing US retail sales rose a better-than-expected 1.4% in October after dropping in September. The strength of consumer spending has been the key concern over the sustainability of the recovery, and this was welcomed by Wall Street.
However, subsequent US economic data were not so positive, particularly on housing. Housing starts slumped 10.6% in October to a seasonally adjusted 529,000 annual rate, while permits fell 4%. This suggests continued weakness in the troubled real estate sector, the source of the recent recession, amid concerns over expiring federal subsidies for first-time homebuyers
Last Thursday, more negative news emerged on the US housing front. It was reported that mortgage delinquencies rose to 9.64% of all loans outstanding in the third quarter. Overall, 14.41% of all US home loans were in foreclosure or at least 30 days past due at the end of the third quarter — or a staggering 1-in-7, and up from 13.16% in the second quarter.
A stabilisation of homeowners' finances and the housing industry will be a key to a sustained economic recovery, apart from a sustained recovery in consumer spending.
Among other US economic news, leading indicators rose 0.3% in October, slightly lower than expected. The Philadephia Federal branch said its gauge of regional manufacturing activity rose to 16.7 in November from 11.5 in October, beating expectations.
