5/2/06 (The Edge Daily) -  Investors returned from the long Chinese New Year holidays to a rousing rally on Feb 3 – despite the fact that many investors were still away for the long break.

Trading volume rose to its highest so far this year – with a hefty 952 million shares changing hands.

A rise in most global bourses when we were closed and a decline in oil prices amid easing tensions over Iran helped boost sentiment from the start of Feb 3’s trading.

The KLCI closed at its intra-day high, up 13.8 points to 927.9. Advancing stocks beat declining ones by a nearly 5-to-1 ratio. Penny stocks and lower liners continued to dominate trading, but most gains came from blue chips, especially plantation stocks.

Plantation stocks were the biggest gainers, with the KL Plantations Index rising nearly 5%.

Leading the gainers' list was IOI Corp, whose shares surged RM1.20 or 9.5% to RM13.80 on heavy volume after the company announced a 30 sen interim dividend.

The stock is often viewed as the favourite of institutional investors seeking exposure to the sector.

Other plantation stocks like KL Kepong, Batu Kawan and Golden Hope rose around 3% each on very high volume.

The strong interest in plantation stocks is indicative of investors’ bullish view on palm oil prices this year.

Having consolidated for nearly two years after hitting RM2,000 per tonne in March 2004, palm oil prices appear to have bottomed out at around RM1,440 and are poised to rally this year – as have most other commodities which recently surged to multi-year highs.

Given the strong rally on Feb 3, and the build-up in volume and buying momentum, we expect this week to start on a positive note.

The buying of plantation stocks is a good sign that institutional interest is also returning to the market (the rally in January was mainly driven by retail stocks), and is not limited to the usual heavyweight blue chips. - InsiderAsia