KUALA LUMPUR: Asian stock markets posted modest gains yesterday, buoyed by positive sentiment in the US, but analysts' views remained mixed as to whether the uptrend is sustainable.

Japan's benchmark Nikkei 225 index led the regional markets, rising 3.3% to 10,581 points, while Hong Kong's Hang Seng Index was up 1.7% to 20,536 points, followed by Shanghai's Composite Index, which rose 1.1% to 3,142 points.

The Singapore and Taipei indices, however, bucked the trend, shedding 0.6% and 1.2% to 2,545 points and 6,655 points, respectively, at the close.

The FBM KLCI closed the day 10.7 points higher at 1,174.49 points, with relatively low volume of 695.19 million shares valued at RM1.11 billion.

Multi Sports Holdings Ltd (MSports) and KNM GROUP BHD [ registerQuotes("KNM", "KNM_span"); ] were the top traded stocks. MSports lost 4.5 sen to 64.5 sen with 38.16 million shares done, while KNM added 0.5 sen to 76 sen, with 33.93 million shares changing hands.

Top gainers for the day were British American Tobacco (Malaysia) Bhd and GENTING BHD [ registerQuotes("GENTING", "GENTING_span"); ], which added RM1.34 and 36 sen to RM45.70 and RM6.59, respectively. DUTCH LADY MILK INDUSTRIES BHD [ registerQuotes("DLADY", "DLADY_span"); ] and Malaysia Smelting Corp Bhd were among the index's top losers, shedding 20 sen to RM11.80 and 19 sen to RM3.11, respectively.

The head of investment for a local fund here said gains in the FBM KLCI were largely driven by expectations of improvements in external factors, such as from US data, while back home, expectations that the overnight policy rate would be maintained at 2% for at least the rest of the year also positively affected the local bourse.

He cautioned, however, the market was giving "mixed signals", with trading volume having stayed pretty much at the same level over the past two weeks, despite the direction made by the index itself.

Meanwhile, last Friday, the S&P 500 had risen to the highest level in 10 months, climbing 2.25% over the week to end the day at 1,026.13 points, while the Dow Jones Industrial Average added 184.56 points to 9.505.96 points.

The indices were boosted by data on home resales in the US, which rose 7.2% month-on-month to 5.24 million in July, the biggest monthly increase in at least 10 years, which also helped fuel hope that the economy was recovering faster than expected.

Comments by US Federal Reserve Board chairman Ben Bernanke who last Friday said prospects for growth in the near term appeared "good", also boosted sentiment.

On whether yesterday's uptrend would be sustainable, the head of investment for the local fund said with banking and PLANTATION [ registerQuotes("PLANTATION", "PLANTATION_span"); ] stocks having a heavy weightage on the index, pricing would likely be sustained.

He said expectations of an economic recovery would buoy the banking sector, while forecasts that crude palm oil (CPO) prices would stay at the RM2,000-RM2,200 level for the rest of the year would keep sentiments positive.

In a note yesterday, ECM Libra Investment Research said: "The new highs in the US markets are a very important technical market development, and will surely buoy our highly correlated (92%) local KLCI market upwards in the next few days."

A slew of other data from the US is also set to be released this week, including the August consumer confidence index, data on new home sales, and second quarter gross domestic product numbers, all of which could be better than expected.

ECM Libra also said the rebound in commodities prices would also prop up the CPO stock-heavy local index.

As at 6.15pm, New York light sweet crude oil for November delivery dipped eight cents to US$74.74 (RM262.33). Crude palm oil prices, also for three-month delivery, had hit a one-week intra-day high of RM2,402, before settling at RM2,375, RM30 higher than the previous close.

"We maintain our positive short-term, mid-term and long-term call on the FBM KLCI and opine that the KLCI will surge strongly towards the 1,200-point level in the next two weeks," ECM Libra said.

Meanwhile, Maybank Investment Bank, also in a note yesterday, said as prices of key blue-chip stocks and indices rose, it believed that risk-reward ratios would increase, that is, that potential risks would increase while potential rewards would greatly diminish.

"Profit-taking and liquidation on rallies may be the best strategy to adopt in view of the tiring daily and weekly technical signals of the FBM KLCI," it said.

It also said the index's last upward thrust to 1,196.46 points on Aug 14 could have stalled, adding should the KLCI break above this level, then it would potentially test its "final and exhaustive" upside targets of 1,202, 1,237, 1,244 and 1,248 points.

The investment bank, which sees the support level for the KLCI between 1,120 points and 1,162 points, also said the resistance areas of 1,165 points and 1,200 points would cap any rebound activities.