03-05-2008: KLCI falls on continued profit-taking

Despite a strong overnight rally on Wall Street, shares on Bursa declined marginally on May 2, as profit-taking activities continued and palm oil prices slid. Investors were also hesitant ahead of the all-important April employment numbers due out later on May 2.

The inability of the KLCI to cross the psychologically important 1,300-mark -– where it had been before the elections -– and concerns over the sustainability of Wall Street's gains and future direction are also leading investors to exercise more caution.

On April 30, the Federal Reserve had cut key US interest rates by 25 basis points to 2%, as expected, but many are of the view that further aggressive cuts are now unlikely. US interest rates have been cut by 350 bp since last September. Those expectations in turn helped lift the US dollar to a five-week high, and lowered commodity prices -– which move in tandem with the dollar.

Reflecting Wall Street's uneasiness, the Dow Jones Industrials gave back about 200 points in intra-day trading on April 30, after the Federal Reserve's interest rate cut decision -– only to regain all those on May 1 as investors focused on the positive aspects of the firming US dollar and falling crude oil and commodity prices.

The KLCI declined by 8.4 points to 1,271.5 on May 2. Market breadth was negative for much of the day, but evened out at the close. A total of 569 million shares were traded.

Shares of Time, Time dotCom, IOI Corp, TM, Media Chinese International, MRCB and Bumiputra-Commerce led the top actives' list.

Plantation stocks like Asiatic, IOI Corp, Sime Darby and Batu Kawan were among the big losers. This came as palm oil prices continued to slide due to slumping soyoil prices and the firming greenback. Crude palm oil futures fell by nearly RM90 per tonne at its lowest during intra-day trading on May 2. Major gainers include DiGi, WCT and Parkson.