Thursday May 8, 11:07 AM
Malaysian shares close lower, snapping three-day rise as oil price soars -UPDATE
KUALA LUMPUR (Thomson Financial) - Malaysian shares closed lower on Thursday, snapping a three-day winning streak as record oil prices and a sharp fall on Wall Street overnight prompted cautious investors to take profit.
But the key index came off its lows as bargain-hunting, especially in oil and gas and construction stocks, offset overall losses.
U.S. stocks tumbled overnight as fears of global economic stagflation resurfaced after crude oil prices soared to a record near $124 a barrel. The Dow Jones Industrial Average fell 1.6 percent to 12,814.35.
The Kuala Lumpur Composite Index (KLCI) closed down 6.8 points or 0.5 percent at 1,280.35, off a low of 1,275.91.
The FTSE Bursa Malaysia 30-large cap index fell 41.18 points or 0.5 percent to 8,311.11 and the FTSE Bursa Malaysia second board index dropped 32.77 points or 0.6 percent to 5,867.65.
Decliners outnumbered advancers 377 to 274, with 286 stocks unchanged and 480 untraded.
Trading volume was low at 486 million shares, valued at 1.1 billion ringgit.
Referring to the low volume of trade, SJ Securities analyst Phua Kwee Hock said: 'The market held steady today, with the selling well contained.'
The market's upside momentum remains intact, he said, forecasting that the key index will hit 1,326 points going forward, driven by the plantation and oil-and-gas sectors.
'High oil prices will sustain interest in these two sectors,'' Phua said.
Meanwhile, Citigroup (NYSE: C - news) said in a strategy note: 'While the increase in inflation is hardly disastrous in a historical context, previous periods of accelerating inflation have been associated with weak equity market returns.'
But equities may fare better this time around relative to other assets in the face of rising prices, and stock valuations are attractive, said Citi.
Higher commodity prices have yet to significantly push up costs, it said. 'For now, the challenge for margins and earnings comes from slower top-line growth, not rising costs.'
Palm (NASDAQ: PALM - news) oil stocks finished mixed after posting strong gains in the previous sessions, with Sime Darby (4197.KL - news) , the world's leading palm oil producer and the biggest stock on the bourse, shedding 1.6 percent to 9.45 ringgit, while second-ranked IOI Corp firmed 0.7 percent to 7.10 ringgit.
Kuala Lumpur Kepong (2445.KL - news) , another palm oil blue chip, lost 1.7 percent at 16.90 ringgit.
PLUS Expressways (5052.KL - news) , Malaysia's largest toll road operator, tumbled 3.7 percent to 3.10 ringgit after the government said that all existing highway concessions are currently under review as it finds ways to curb rising prices.
Litrak, a smaller concessionaire which owns toll highways in the larger Kuala Lumpur area, rebounded on bargain-hunting, advancing 0.5 percent to 3.82 ringgit.
Tobacco company JT International (2615.KL - news) was among leading gainers, rallying 7.1 percent to 4.50 ringgit after reporting a 10.7 percent rise in first-quarter net profit, helped by strong cigarette sales.
Malaysia's fourth-largest banking group RHB Capital (1066.KL - news) was up 1.0 percent at 5.25 ringgit before it was suspended in the afternoon session, after it announced that Abu Dhabi Commercial Bank (ADCB) will pay 3.876 billion ringgit ($1.22 billion) for a 25 percent stake in the banking group.
The deal values RHB Capital at a price of 7.20 ringgit per share, representing a premium of 37 percent to the company's last traded price of 5.25 ringgit.
ADCB is buying the stake from the Employees Provident Fund (EPF). Malaysia's largest pension fund has been searching for foreign strategic partners for its investment in RHB Capital since last year as it attempts to meet a central bank ruling.
The ringgit closed at 3.2170/2220, while the three-month interbank rates were at 3.61/62 and overnight rates stood at 3.48/50.
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