Malaysian Stock Index Rebounds From Biggest Decline in a Decade

Source : Bloomberg


March 11 (Bloomberg) -- Malaysia's stock index rebounded from its biggest tumble in a decade as some investors judged the decline, sparked by the ruling coalition's worst election performance in 50 years, excessive.

Malaysian Resources Corp. surged the most in two months, leading construction stocks higher while water-related shares including Kumpulan Perangsang Selangor Bhd. advanced, after the prime minister said he still had government support for public works spending.

"Yesterday was panic selling, it was overdone", said Lye Thim Loong, who helps manage the equivalent of $593 million at Avenue Invest Bhd. in Kuala Lumpur. The government also eased investors' concerns by backing the prime minister, he said.

The Kuala Lumpur Composite Index rose 24.68, or 2.1 percent, to 1,197.90 as of 12:47 p.m. local time. It earlier climbed as much as 3.3 percent, set for its biggest gain since Aug. 20. The measure, down 21 percent from its Jan. 11 peak, yesterday fell 9.5 percent, the most since Sept. 8, 1998.

The benchmark's 14-day relative strength index fell to 18 yesterday, below the 30 level that some investors use as a signal to buy.

Malaysia's stocks lost $27 billion in market value yesterday, as opposition parties took control of almost half the states contested in March 8 elections, raising doubt over Prime Minister Abdullah Ahmad Badawi's political future and a 200 billion- ringgit ($63 billion) spending plan.

Malaysian Resources, the biggest developer of office space, climbed 9 sen, or 7.1 percent, to 1.36 ringgit, after plunging 34 percent yesterday. UEM World Bhd. added 23 sen, or 8.4 percent, to 2.96 ringgit, after yesterday's 21 percent slump. MMC Corp., a builder and port operator, rose 8 sen, or 2.8 percent, to 2.98 ringgit.

"More Certainty"

Abdullah said yesterday that the ruling National Front coalition supported his leadership and that the government has no intention of changing policies.

"There's more certainty", with the leadership after he was sworn in as prime minister yesterday, said Ang Kok Heng, who manages 450 million ringgit at Phillip Capital Management Sdn. in Kuala Lumpur. Still, the market "isn't completely stabilized".

Some analysts say the market may extend declines this week.

The Composite Index may "head all the way south to 1,100 points" this week, Gan Kim Khoon, head of equities at OSK Investment Bank in Kuala Lumpur said in an interview with Bloomberg Television. "The sentiment in the market is very, very weak", he said.

Projects under the government's development program may be delayed or deferred, he said.

With yesterday's slide, Ang said he's taking advantage of yesterday's selloff to buy "recession-proof", stocks such as betting and power company Tanjong Plc, Digi.Com Bhd. and Bumiputra-Commerce Holdings Bhd., he said. He won't buy construction stocks, citing uncertainty of possible delays in building contracts, he said.