Malaysian stock market warms up to rise in liquidity

The FTSE Bursa Malaysia KLCI (Kuala Lumpur Composite Index) is expected to be on the positive side this week due to interest rate trims by central banks. The bourse will see more upside this week, tracking the rebound in the commodities market and liquidity-driven rally in the US and European markets, The Star Online reported Monday. 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, the report said. Affin Investment Bank Vice President and Head of Retail Research Dr 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 last 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 aggressive stimulus measures in view of the faltering global economy. Dr 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 and gas sector, upcoming mega Initial Public Offerings (IPOs), merger talks in smaller banking stocks and dividend play in consumer and telcom 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. The FTSE Bursa Malaysia KLCI comprises the largest 30 companies listed on the Malaysian Main Market by full market capitalisation that meet the eligibility requirements of the FTSE Bursa Malaysia Index Ground Rules.