Thursday 28 Mar 2024
By
main news image

KUALA LUMPUR (Feb 22): The FBM KLCI is expected to resume its upward trend next week, following the firmer buying action seen last Friday at the local bourse, and improved sentiment at most global markets.

Global equity markets mostly rose and the dollar traded mixed on Friday as recent data that has underpinned hopes for sustained U.S. economic growth offset new data showing home resales fell to an 18-month low last month, according to Reuters.

Cold weather and a lack of housing stock sidelined potential home buyers in January, the National Association of Realtors said on Friday, in the latest report indicating severe winter weather has dragged on economic growth, it said.

Affin IB vice president and head of retail research Dr Nazri Khan said that going forward he expects firmer market action after the local stock market advanced for the fourth straight week (gaining a total of 59 points or 3.3% since 4th February 2014).

He said the FBM KLCI should resume its upward path as bulls took heart from reduced prospects for a shift in Fed's tapering bias, recovering USA economy (positive report on US manufacturing activity which are the highest since May 2010), rising commodity prices and the unexpected liquidity boost from the Bank of Japan.

“The fact that FBM KLCI scored a sizeable monthly gain in February despite signs of weakness in the Chinese economy shows near term relative strength,” he said.

Nazri said there were re also signs of global commodity making a comeback.

He said the catapult seen in commodities was likely to spill over to local resource stocks (oil gas and plantation) benefitting Bursa and the FBM KCLI.

“Given the bullish commodity seasonalities of March-June and the FBM KLCI registering the fourth consecutive up weeks, we see higher probabilities for deeper upside, following a strong momentum by the local market over the past year (FBM KLCI has gained 10.1% since January 2013, 39.5% since September 2011 and 128.1% since October 2008).

“On the external front, we see a wave of bullishness sweeping through global markets on optimism that politicians in Washington finally do earlier-than-expected debt deal breakthrough,” he said.

Nazri said that on the technical front, the near term bias had turned in favour of the bull camp with immediate support pegged near 1,800 and 1,780 levels while resistance spotted near 1,830 followed by 1,850 levels.

He said weekly market breadth remained positive with gainers edging losers 3.8 to 3 on impressive average daily trade totalling 2.8 billion shares worth RM2.4 billion.

The fact that FBM KLCI has broken above 1,800 psycho level and all key moving average (20, 50 and 200) with record volume (3.6 billion shares on Monday 17th Feb) may suggest stronger bulls ahead.

Nazri said that from the intermarket analysis perspective, the stronger leadership by economically-sensitive groups (Oil Gas, Construction, Technology & Properties) and stronger gain from smaller cap stocks (FBMSmallCap & FBMAce) suggest healthy momentum in the near term.

Finally, on the domestic front, the upcoming Pengerang ETP-Petronas projects (worth RM60 billion) and the impending launching of 2014 biggest mega IPO namely 1MDB Berhad (raising RM10 billion) should be market positive, he said.

“We expect the two catalyst to raise foreign investors interest, attract more Bursa foreign inflows and spur oil gas, power and properties sectors,” he said.

Nazri said while local blue chips consolidate with buoying sentiment, impressive rotational interest on local small caps should showcase healthy risk taking with active retail participation accumulating penny stocks such as Iris, Sona, Daya, ManagePay, Tadmax, Asiapac and THHeavy.

He said that strategy wise, given that the short term trend had turned positive toward 1,850, traders should accumulate and capitalize on weaker dollar and ride on upturns in economically-sensitive sectors.

“While conservative investors may buy our roadshow Ten Featured Stocks i.e. Coastal, Yinson, Takaful, Jobstreet, Metro Kajang Holding, Inari, Uzma, THHeavy and Tambun, aggressive bulls might consider buying index futures on dips toward 1,800, positioning for a larger jump to all time high of 1,877,” he said.

 

      Print
      Text Size
      Share