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UPDATED VERSION. What powered the bull run that drove up KLCI to 1240 points?

According to MIMB Investment Bank, which was quoted by Oriental Daily News, it's due to substantial amount of hedge funds getting into the Malaysian stock market. Quote:

These hedge funds usually borrowed money from Japan, which offers exceptionally low interests. They had the Japanese Yen converted into ringgit, and then bought into the ringgit-based counters.

As a result, when the ringgit strengthens, and when the stock market goes up, these hedge funds will enjoy double gain.

Now, don't ask me if the current bull run can sustain.

But economic theories generally remind us that, in scenario like this, the situation hinges on whether the Japanese Yen will strengthen, and how soon.

If the Japanese Yen goes up against the ringgit, the hedge funds which bought into Malaysian stocks will start to lose money. The faster the Japanese Yen goes up, the faster will these hedge funds throw out their positions denominated in ringgit.

We have seen this happen before.

UPDATE: A reader alerted Screenshots of the following:

Bank of Japan (BOJ) is still divided in raising interest rate. The BOJ kept the key overnight call rate target unchanged at 0.25% at in its January policy meeting in a rare split vote of 6-3.

BOJ cited recent softness in consumption and prices as the main reason for holding off on a rate hike. The term is called "carry trade play"

The next BOJ policy board meeting is Feb 20-21. The environment for carry trades is likely to continue for the next two months!

Meanwhile, Oriental Daily News reported February 11 that Japanese Finance Minister Koji Omi has hinted at increasing the interest rates in response to European economies' concerned over the sluggish Japanese forex.