Thursday, March 11, 2010

Bursa Stocks May Rise 10pc Further

Malaysia’s stock index may rise a further 10 per cent in 2010 on the “currency game” as investors buy more equities after the Malaysian ringgit gained the most in Asia this year, Manulife Asset Management (Malaysia) Sdn. said.

The FTSE Bursa Malaysia KLCI Index, which rallied 45 per cent last year, may reach as high as 1,450 by the end of 2010, said Jason Chong, chief investment officer at Manulife Asset in Kuala Lumpur. The ringgit advanced 2.7 per cent this year after gaining 1.2 per cent in 2009.

Foreign investors are “playing the currency game on the back of expectations interest rates will go higher and the ringgit will strengthen,” Chong, who helps manage 2.5 billion ringgit ($750 million) of assets at Manulife, said in an interview today. “While the rest of the region is coming down, they’re looking at Malaysia as a safe haven.”

The ringgit rallied after the central bank raised its benchmark interest rates on March 4 for the first time in almost four years, saying record-low borrowing costs were no longer warranted as the economy emerges from recession and inflation. A stronger ringgit helps boost the value of foreigners’ assets denominated in the currency, including stocks.

Banks, plantations and building material suppliers are expected to lead gains, said Chong. Prime Minister Najib Razak said last week that Southeast Asia’s third-largest economy may expand 6 per cent this year, twice the pace of the official forecast. Government data on March 5 showed Malaysian exports rose 37 per cent from a year earlier in January, the most in 11 years.

Foreign Investors
Najib has unveiled 67 billion ringgit ($20 billion) of stimulus measures and accelerated efforts to open up the economy to attract more foreign investors. The government has eased rules governing overseas investors, initial public offerings and property purchases in a bid to lure more foreign money and shore up the economy.Chong, who joined Manulife on Feb. 8, was previously chief investment officer of UOB-OSK Asset Management in Kuala Lumpur.

The market’s price-to-earnings multiple is 16.1 times current year estimates, the highest level since February 2008, according to data compiled by Bloomberg. The multiple may climb to 18 times in the short term, he said, without specifying a precise period. -- Bloomberg

Currency Gain

‘Brightening’ Outlook
A central bank survey of economists in Singapore projected 6.5 per cent growth for the city-state’s gross domestic product this year, a percentage point more than at the last poll in December. Philippine exports in January jumped 42.5 per cent, the most since 1995, according to figures published today.

“The economic picture is brightening despite all the caution flagged by the central banks and finance ministry officials around the world,” said David Cohen, a Singapore- based economist at Action Economics. “The data still continues to show a global economic recovery led by Asia. That should be positive for Asian currencies.”

The ringgit strengthened and the Kuala Lumpur Composite Index of shares was headed for a two-year high before a government report tomorrow that’s forecast to show industrial output picked up in January. Production increased 11.7 per cent from a year earlier following an 8.9 per cent gain in December, according to the median estimate of economists surveyed by Bloomberg. The central bank raised its key interest rate last week, saying an economic recovery is “firmly established.”

“The recovery story is looking good and the market is upbeat about the prospect of further rate increases,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur. “Stocks are rising, providing support for the ringgit.”

Foreign Funds
Taiwan’s dollar today reached a one-month high of NT$31.73 versus the greenback before slipping to close little changed on suspected central bank intervention. Overseas investors bought $1.4 billion more of the island’s shares than they sold this month through yesterday.

“There are foreign funds who want to invest,” said Hao- Yun Juan, a foreign-exchange trader at Kingstown Bank in Taipei. “People will not push appreciation too rapidly because the central bank will give some support for the Taiwan dollar.”

India’s rupee strengthened 0.4 per cent to 45.45 following net share purchases of $1.6 billion in the country’s first five trading days of March. Korean equities attracted $1.4 billion from abroad this month through yesterday.

The Philippine peso climbed 0.2 per cent to 45.640 per dollar and the Thai baht strengthened 0.1 per cent to 32.68. The yuan was little changed at 6.8262. -- Bloomberg

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