Stock market, will it rise further?

Malaysiakini  ‘s news-in-brief reported that Malaysia ‘s economy grew at 5.3% in the first quarter of this year which is better than expected.

How is the outlook for the rest of the year? A lot of us are asking how will the stock market perform?

KLCI has gained almost 46% over the past 11 months. Ringgits has strengthened to 3.39 and is expected to strengthen further to about 3.24 by the end of the year.

The stock market valuation is now quite high, with prospective PE at 18 X, higher than Thailand, Indonesia and Philippines., and is on par with Singapore’s valuation.

Despite this, Bloomberg reported that many analysts are still bullish.
But I think investors have to be careful at this stage, bearing in mind that China’s market has gone very high and any crash there would have a big impact on the world stoclk market. I normally look at the figures but do not believe totally what the analysts say.

On the plus side, government is going to spend 200 billion ringgits on road, bridges and other infrastructure until 2010.

The recent hefty pay increase will also spur growth and of course inflation too.

Palm oil is doing very well, and is expected to fetch high prices as China is incresaing its import of palm oil. Companies are expected to report higher earnings .

To qoute Bloomberg:

 Malaysia stocks, Southeast Asia’s most expensive, are the only ones in Asia that have risen for 11 straight months. The rally may have further to run as rising government spending and wages lift earnings.

Malaysia’s economy grew by 5.3 percent in the first quarter, the central bank said yesterday. Economists surveyed by Bloomberg News expected 4.7 percent, based on the median forecast.

“The domestic economy has been improving,” said Mark Jolley, Deutsche Bank’s regional equities strategist in Hong Kong. “It’s also been one of the best markets for upward earnings surprises.”

Global funds doubled their net purchases of Malaysian stocks to 18 billion ringgit in the first quarter compared with the preceding quarter, central bank data showed today. That’s the most they have bought since the bank started keeping records in 1991.

A cheap currency, earnings upgrades, foreign buying and a potential interest rate cut as inflation eases are all reasons to remain upbeat on Malaysia, Christopher Wood, CLSA Ltd.’s Hong Kong-based global equity strategist said May 23.

“Malaysia has been outperforming since the fourth quarter of 2006,” said Wood. “While it’s already had a considerable rally, I think it’ll be a good market all year.”

For the full article on this quote , p[lease go to the bloomberg link: Malaysia Stocks Have Record Winning Streak on Ringgit