Palm | Kelapa Sawit

KLSE-July 7 (Reuters) - Malaysian stocks may stabilise after steep falls in past months as rising inflation and political uncertainty are fully reflected in share prices, leaving investors to focus on the country's resilient economy.

The benchmark Kuala Lumpur Composite Index <.KLSE> closed at a 16-month low of 1,134.14 points on Friday, shedding 4.7 percent last week alone.

The index fell a further 0.6 percent in the morning session on Monday.

But the benchmark, which is down about 22 percent so far this year, is in better shape than other Asian stock markets, such as China <.SSEC>, India <.BSESN>, Vietnam <.VNI> and the Philippines <.PSI>, which have fallen between 30-50 percent this year.

While the index could fall further in the short term, the market is close to steadying, analysts say.

"After a series of de-ratings, we see little downside risk to the market, given how gloomy sentiment is currently," said Choong Wai Kee, the head of Malaysia research at Citigroup , in a report.

"We are reiterating our positive call on Malaysia on the premise that too much negative news is already in the price."

Malaysia's benchmark is now trading on a price to earnings multiple of around 11 times -- close to its lowest-ever valuation seen during the Asian financial crisis in 1997/98, and compared to a historical average of around 21 times earnings.

FKLI-July 7 (Bernama) -- The Kuala Lumpur Composite Index (KLCI) futures contracts were higher on continued bargain-hunting activities after previous losses, dealers said.

"However, the uptrend may not sustain as prices are expected to fall with the decline of share prices on the cash market," one of the dealers said.

FKLI July 2008 arose 6.0 points each to 1,116.0. Turnover stood at 4,113 lots.

FCPO-July 7 (Reuters) - Malaysian crude palm oil futures fell almost 2 percent on Monday as a build-up in supplies and weakening soybean oil prices weighed on the market.

By the midday break, the benchmark September contract on the Bursa Malaysia Derivatives Exchange fell 1.8 percent, or 65 ringgit, to 3,565 ringgit ($1,092) a tonne.

"It is a supply overhang and lower Chicago soybean oil which have triggered a selloff," said one dealer with a domestic brokerage. "I think now we have factored in the supply issue, the market should move up as demand is going to be good for the festival season."

Malaysia's end-June palm oil stocks are likely to touch 2.1 million tonnes from 1.9 million at end-May because of slowing demand in the last few months.