Malaysian shares sharply higher on Wall St rebound, US discount rate cut

Malaysian shares sharply higher on Wall St rebound, US discount rate cut

	Published : Mon, 20 Aug 2007 03:27 By : Agencies Print this Story

KUALA LUMPUR (Thomson Financial) - Malaysian shares rebounded sharply in early trade Monday as investors picked up bargains after Wall Street reacted positively to the US Federal Reserve's 50 basis points cut in its discount rate to 5.75 percent.

At 9.41 am, the Kuala Lumpur Composite Index (KLCI) was up 33.91 points or 2.9 percent at 1,225.46.

The FTSE Bursa Malaysia 30-large cap index gained 194.94 points or 2.5 percent to 7,860.56 and the second board index rose 2.03 points or 2.1 percent to 96.89.

Gainers led losers 743 to 42, with 79 stocks unchanged and 474 counters untraded.

Trading volume was 350.671 million shares, valued at 479.219 million ringgit.

'The (rate cut) move was unexpected but welcomed by the markets judging from the reaction of the US and European markets last Friday,' Aseambankers Research said in a note to clients.

This is a positive move for Asian markets as well after last week's sharp plunge, it said.

The last time the Fed enacted emergency interest rate cuts in between Federal Open Market Committee (FOMC) meetings was in 2001, first in reaction to the bursting internet bubble and then in the aftermath of the September 11 terrorist attacks.

'It is a signal that the Fed is going to cut the benchmark federal fund rate, currently at 5.25 percent, in the next FOMC meeting on September 18 as historical data show the primary discount rate is always set 100 basis points above the Fed fund rate,' Aseambankers said.

'We would not be surprised if the Fed decides to restore the 100 basis points gap between the two rates by cutting the Fed fund rate by 50 basis points as well in next month's FOMC meeting or even before that,' it said.

Among index heavyweights, Maybank, the largest lender in Malaysia by assets, was up 30 sen or 2.8 percent at 11.20 ringgit, while national power company Tenaga gained 10 sen or one percent to 10.10 ringgit and Telekom Malaysian surged 20 sen or 2.1 percent to 9.75 ringgit.

Industrial group UMW Holdings, which assembles Japanese Toyota cars in Malaysia, was up 12 sen or 4.6 percent to 2.75 ringgit after the company said last Friday its second-quarter net profit jumped 71.2 percent to 106.75 million ringgit on improved sales from its automotive and equipment divisions.

Diversified financial group Malaysian Plantations, which operates Malaysia's smallest lender by assets Alliance Bank, gained 40 sen or three percent to 13.60 ringgit after it said last Friday that its first quarter net profit jumped to 95.15 million ringgit from 39.56 million a year earlier due to an increase in operating profit and higher recoveries.

Shares of Malaysian air cargo operator Transmile Group surged 14 sen or 3.8 percent to 3.82 ringgit after saying the company expects 'single-digit earnings growth' in the near term after it revamps its operations and seeks new clients.

(1 US dollar = 3.51 ringgit)

munfoo.hong@thomson.com

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