KUALA LUMPUR: Taking its cue from a rally on Wall Street last Friday, most regional markets rebounded on Monday after a weak performance last week due to inflation and interest rate fears.
The KLCI rose in tandem, and was in positive territory throughout the day. The benchmark index gained as much as 12 points just before the lunch break, and closed 8.7 points up at 1,203.1 points.
The index was helped by gains in several blue chips, notably BAT, Tanjong plc, TMI, YTL and Public Bank-foreign. Volume leaders include Liqua, IOI Corp, AirAsia, Maybank and Gamuda. Losers include PPB, LCL and Kim Hin.
Unlike the headline index though, the broader market, was considerably weaker - continuing a trend that has since become quite common for some time. Market breadth was negative for much of the day - at about 3-to-2 down, before reversing to about 7-to-6 at the close.
Trading volume also remained very thin with just 387 million shares changing hands, one of the lowest so far this year. The weak market breadth and low trading volumes reflect investors' continued sense of caution, given the number of domestic and external economic issues.
Domestically, the recent sharp hike in petrol prices will affect consumer demand. With companies mulling over price increases as well, the full impact of belt-tightening measures will be felt in the coming months - together with a rise in inflation.
Externally, inflation remains a big worry, as central banks struggle to contain prices even as growth weakens. In the US, the interest rate downcycle appears over and the Federal Reserve is now hinting at raising rates. This could bring more pain to the US economy and the still struggling housing sector.
In the last few weeks, Russia, Brazil, Vietnam the Philippines, Indonesia and India have all raised interest rates, while China instituted more credit tightening moves.
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