Malaysian shares rose one percent to end at their three-week high on Friday as investors bet on a possible revaluation of Malaysian currency.
Speculation about a possible revaluation resurfaced after China raised interest rates for the first time in nine years on Thursday to cool its heated economy, a move some analysts said signalled steps to liberalise the yuan.
Malaysia competes with China for major export markets and is widely expected to revalue the ringgit should Beijing move on the yuan. The ringgit and yuan are both pegged to the dollar.
"A lot of foreign investors are coming in. They expect us to revise the peg," said Abdul Razak Don, who helps manage 2 billion ringgit ($5264 million) worth of shares at Malaysia National Insurance Bhd.
The 100-share Composite Index rose one percent to end at 861.14 points, it's highest since October 8. Malayan Banking Bhd, the countries top lender and the Composite Index's biggest component, rose 1.9 percent to 11.00 ringgit.
Telecom Malaysia, the state-owned telephone firm, was up 0.9 percent at 11.50 ringgit.
Power utility Teenage National Bhd, the country's third largest stock after Maybank and Telecom, gained 2.8 percent at 11.10 ringgit.
It was the sixth most active stock with 7.4 million shares traded. Overall market volume was a moderate 340 million shares worth 672 million ringgit ($176 million) as gaining stocks beat losers 466 to 253.
Second-biggest banking group Commerce Asset-Holding Bhd rose 1.8 percent to 4.60 ringgit.