KUALA LUMPUR

Malaysian share prices closed 0.8 per cent higher on Wednesday driven by gains in financials, government-led construction companies and select blue chips, dealers said.

The Kuala Lumpur Composite Index rose 8.83 points to 1,209.11.

But underlying sentiment remains cautious ahead of the Federal Open Market Committee (FOMC) meeting outcome later on Wednesday, a dealer told Dow Jones Newswires.

The FOMC was widely expected to hold its base lending rate at 2.0 per cent after a series of aggressive cuts since last September.

The dealer said the bourse was tipped to drift in the 1200-1210 range on Thursday.

Among gainers, Gamuda rose 5.9 per cent at 2.33 ringgit and Commerce-Asset gained 1.8 per cent at 8.40 ringgit. Maybank added 1.4 per cent at 7.25 ringgit while Tenaga rose 1.9 per cent at 8.25.

On the downside, Resorts lost 2.1 per cent at 2.75 ringgit and IOI Corp shed 1.3 per cent at 7.45 ringgit.

HONG KONG

Hong Kong shares snapped a four-day losing streak to rise 0.8 per cent in Wednesday's truncated session, but gains were capped by a 2 per cent drop in shares of Hong Kong Exchanges & Clearing (HKEx).

The local market opened for trade at 0630 GMT (2.30 pm Singapore time) after typhoon signal No 8, hoisted late on Tuesday night, was lowered.

Offshore oil producer CNOOC led the gains with a 3.4 per cent jump after international crude oil prices hovered around last week's record highs ahead of the Federal Reserve?s interest rate decision.

The US Federal Reserve is expected to hold interest rates steady after a two-day meeting, but Hong Kong property stocks fell on Wednesday after local banks raised mortgage rates.

Sun Hung Kai Properties eased 0.97 per cent and Sino Land fell 2.1 per cent after Hang Seng Bank joined other lenders in raising rates for mortgage lending amid higher interbank rates.

Shares in HKEx, Asia's largest listed bourse operator, slid to HK$113.50, their lowest level this year, before closing down 2.3 per cent at HK$115.0 as analysts warned turnover would peter out in coming months.

The average daily turnover, the most important determinant of HKEx's earnings, has dropped from HK$88 billion to HK$65 billion in the last 10 trading sessions, Morgan Stanley said on Monday.

The Hang Seng Index rose 179.14 points to close at 22,635.16, also boosted by a rebound in mobile maker Foxconn International Holdings and Chinese stocks.

Foxconn jumped 3.7 per cent a day after it dropped to a 2-1/2-year low. The stock has been ravaged by concern over falling market share at Motorola, its biggest customer for contract manufactured handsets.

The China Enterprises Index outperformed, rising 1.5 per cent, as it tracked a 3.6 per cent surge in the Shanghai Composite Index.

Mainboard turnover stood at HK$37.9 billion (S$6.63 billion) for the one-and-a-half hours of trade against HK$59.17 billion for the whole of Tuesday.

'The A-share market has been looking up in the last few sessions and there is talk that oil prices my have peaked in June. So we are probably seeing the beginning of a rally in the Hong Kong market,' said Mr Patrick Shum, strategist with Karl Thomson Securities.

Chinese financials rebounded, helped by the rally in mainland shares on talk that the market's bear run may have left valuations at a reasonable level.

ICBC China's number 1 bank rose 1.7 per cent and Bank of Communications gained 2.1 per cent.

Mainland telecom stocks also broke out of their losing spell, with China Unicom gaining 2.5 per cent and China Netcom climbing 3.1 per cent.

Shares in Shaw Brothers surged 12.1 per cent on local media reports that the film and TV company was close to being bought out by Mr Yeung Kwok Keung, chairman of property developer Country Garden, for HK$12.5 billion.

Earlier, Mr Yeung was reported to be eyeing a stake in Shaw Brothers' 26 per cent-owned local broadcaster, TVB. TVB shares jumped 4.6 per cent.

SHANGHAI

Blue chips led Chinese shares sharply higher and turnover rose on Wednesday amid increasing talk that the market's bear run may finally have left valuations at reasonable levels.

The Shanghai Composite Index ended up 3.64 per cent at 2,905.014 points, near its intra-day high of 2,910.481, after gaining 1.54 per cent on Tuesday. It was the highest close in a week, leaving the index 53 per cent below last October's peak.

Rising Shanghai stocks outnumbered losers by 896 to six, with over 60 Shanghai shares rising their 10 per cent daily limits.

Turnover in Shanghai A shares expanded to 67.2 billion yuan (S$13.4 billion), still modest but up from Tuesday's very thin 49.7 billion yuan.

China Life Insurance surged 4.42 per cent to 26.91 yuan while property giant Vanke climbed 3.52 per cent to 9.68 yuan, which traders took as further signs that some funds had resumed buying blue chips in response to valuations.

As the index sank to fresh 16-month lows in the past week, several brokerages and investment banks issued reports saying valuations should support a market rally in the second half of this year.

'There is value emerging, even in the A share market. For 2009 consensus earnings, Shanghai is now trading at 14 times, comparable to H shares and red chips' in Hong Kong, Mr Jonathan Schiessl, manager of the Ashburton Chindia Fund, said in a report on Tuesday.

'With foreign investors capitulating, short levels extremely high and the absence of a single China bull, it wouldn't take much to turn things around.'

And the official China Securities Journal reported on its front page on Wednesday that the average historic price/earnings ratio for A shares in Shanghai and Shenzhen had dropped to 23.51 times, not far from the 19.96 times hit during the stock market slump in mid-2005.

It quoted analysts as saying this suggested value had reappeared in Chinese stocks.

Base may be forming

Over the past week, the index has repeatedly tested and held on a closing basis chart support at 2,723-2,732 points, its late February 2007 and March 2007 lows. Some investors believe that level may be a base for a rally.

'July to August - ahead of and around the Beijing Olympics - should be the best and safest time for the stock market. It might move between 2,500 and 3,300 points, though it's to predict what will happen after the Olympics,' said Mr Li Shiming, analyst at Galaxy Securities.

Any index close above last week's high of 2,945 points would be short-term bullish technically, triggering a minor triple bottom formed by this month's lows.

But the index would still face major resistance at the April low of 2,990 points, and would need to break its downtrend line from January, now at 3,150, to start looking longer-term bullish.

Investors remain worried by high inflation and tightening monetary policy, as well as by the possibility of further domestic energy price hikes, analysts noted.

'What's happening now is just a technical rebound - room for an uptrend is limited. So overall, the market is likely to consolidate,' said Mr Zhang Yanbing, analyst at Zheshang Securities.

Baosteel rebounds

Among major gainers on Wednesday, leading steel maker Baoshan Iron and Steel jumped 5.85 per cent to 9.60 yuan, following a 7.83 per cent slide on Tuesday after its parent group agreed on a US$4.2 billion takeover of steel firms in Guangdong.

Hubei Aviation jumped its 10 per cent limit to 11.26 yuan after saying its controlling shareholder would extend by two years a lock up period for shares which were due to become tradable in November.

The controlling shareholders of several firms have now made such pledges, possibly with encouragement from securities regulators, who are trying to improve the market's supply/demand balance.

'This has helped to restore some confidence among investors - they're talking about which firm will be the next to announce such a pledge,' Mr Zhang said.

Three new shares staged strong debuts in Shenzhen, with Yantai Spandex surging 61 per cent from its IPO price to 29.85 yuan, Suzhou Hailu Heavy Industry up 91 per cent to 19.96 yuan and Shenzhen Rainbow Fire Chemical Industry up 32 per cent to 16.60 yuan.

Haibo climbed 5.79 per cent to 4.93 yuan. Sources told Reuters that Shanghai's biggest taxi operator, Dazhong Transportation, was in talks to acquire Haibo's taxi unit.

Among losers, heavy machinery maker Zoomlion Industry Science and Technology Development tumbled its 10 per cent limit to 18.94 yuan after being suspended since April 7. It said on Wednesday it had won a joint bid with Goldman Sachs and two other investors to buy Italy's Compagnia Italiana Forme Acciaio (Cifa) for 271 million euros.

Jinzhou Port plunged 10 per cent to 8.13 yuan after being suspended since May 27. Dalian Port said it planned to buy an 18.9 per cent stake in Jinzhou Port for about 1.91 billion yuan to become its second-biggest shareholder and a strategic partner.

TOKYO

Japan's Nikkei stock average edged down 0.1 per cent to a one-month closing low on Wednesday in its longest losing streak this year, with Toyota Motor Co and other exporters sold as worries about the US economy hit blue-chip performers.

The Nikkei's fifth straight negative day saw property developers suffer after real estate firm Suruga said it had filed for court protection from creditors, while steelmakers also slid.

But bargain-hunting at the lows helped buoy the market, along with large-scale buying of futures, while defensive shares such as East Japan Railway forged ahead before a US Federal Reserve rate setting meeting ends later on Wednesday.

'The world economy is definitely slowing,' said Mr Takahiko Murai, general manager of equities at Nozomi Securities.

'Talk of a US recovery was too optimistic, and worries here have been renewed. There's also concern about emerging markets.'

Exports to the United States fell 9.5 per cent in May to mark the ninth straight month of decline as slowing growth there dented demand for Japanese automobiles, while exports to the European Union were down 1.1 per cent, Ministry of Finance data showed on Wednesday.

The Nikkei shed 19.64 points to 13,829.92, its lowest close since May 28. The broader Topix lost 0.2 per cent to 1,346.08.

Toyota on Tuesday said it would be very difficult to hit its annual sales target in the United States, and Nissan Motor said on Wednesday that industry-wide sales in the United States this year would be well below 15 million vehicles.

Nissan Chief Executive Carlos Ghosn also said he expected steel firms to launch another round of price hike talks. But market players said it was still too soon to write off a summer rally.

'Once we start seeing Japanese first-quarter results next month, we could see some upward revisions due to the yen's weakness against the dollar - and high oil prices may only erase some of this positive impact,' said Mr Fujio Ando, senior managing director at Chibagin Asset Management.

Property pummelled

Property developers sagged after the Suruga news, which included the company's defaulting on its bonds, the first such case in Japan for seven years.

Tokyu Land slid 3.7 per cent to 618 yen, Sumitomo Realty & Development shed 2.8 per cent to 2,230 yen and Mitsubishi Estate ended down 2.2 per cent at 2,500 yen. Suruga plunged 40 per cent to 121 yen.

Nippon Steel the world's second-biggest steelmaker, slipped 1.2 per cent to 578 yen on concerns Baosteel and Rio Tinto's deal for an up to 96.5 per cent hike in iron ore prices could add to costs for Japanese steelmills.

No 3 steelmaker JFE Holdings declined 3 per cent to 5,230 yen. The iron and steel subindex ISTEL dropped 1.3 per cent.

Toyota slipped 1.3 per cent to 5,160 yen, Sony shed 1.6 per cent to 4,920 yen, and industrial robot maker Fanuc fell 1.4 per cent to 11,400 yen.

Among the bright spots were defensive shares such as East Japan Railway and Central Japan Railway which rose on expectations for passenger traffic growth during the summer vacation season due to the high price of oil, likely to force travellers to leave their cars at home.

East Japan Railway gained 2.5 per cent to 849,000 yen while Central Japan Railway rose 4.6 per cent to 1.14 million yen.

Trade picked up, with 1.98 billion shares changing hands, compared with last week's daily average of 1.94 billion.

Advancing shares beat declining ones by 871 to 760. -- REUTERS, AFP

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