KUALA LUMPUR (Feb 28): The FBM KLCI is expected to trend cautiously higher next week, building on its momentum from the past three months.
U.S. stocks closed lower on the last trading day of February last Friday after mixed U.S. economic data on a day when European stocks hit records and oil prices rebounded for their first monthly gain since June, according to Reuters.
The Nasdaq was the weakest of the three major U.S. indexes on Friday, weighed down by Apple Inc as some investors took profits ahead of its March 9 product unveiling, it said.
Affin IB vice president and head of retail research Datuk Dr Nazri Khan said that going forward, he expects Bursa to build on its past three month momentum (where the FBM KLCI gains a total of 145 points or 8.6% since Dec 17, 2014) to trend higher towards 1850 resistance level, driven by accommodative Federal Reserve policy, positive external sentiment, positive global economic data and rising oil price.
“We note a round of bullishness sweep across the global equity markets in response to last week testimony from Federal Reserve Chair Janet Yellen and a series of positive global macro data (China Manufacturing, USA Home Sales, USA Inflation, Europe Unemployment).
“We expect many Asian bourses including Bursa to gear up the upside momentum, with MSCI All-World and FTSE All -World equity index (2.3% & 2.5% w-o-w) rose to its best close since May 2008,” he said.
Nazri said a pick-up in China’s manufacturing sector also supports the broadly optimistic mood in the Asian markets.
Nazri, who is also president of the Malaysian Association of Technical Analysts, said that on the technical front, following four unsuccessful attempts over the past two week, the FBM KLCI finally punched through above 1,800 level with a rising volume and positive breadth.
He said the upside penetration of the FBM KLCI above the psychological resistance of 1800 level would open up upside possibilities of a new leg towards 1850 level and ultimately the record high of 1896 over the medium term.
“On the market breadth, the FBM KLCI recouped 43 points (2.4%) in two weeks as gainers edge losers 453 to 366 on higher average daily trade totalling 1.8 billion shares worth RM2.05 billion.
“Studies are showing positive momentum but are now in overbought territory, so some caution is warranted,” he added.
Nazri said the market's close above the 20-day and 50-day moving average suggested the short-term and medium term trend remain positive.
He said while major support were pegged at 1800 and 1780, the key resistance were spotted at 1830 and 1850 levels respectively.
“Overall, the market's technical posture is bullish and could see more upside follow-through in the early March session.
“The FBM KLCI’s strength back above 1830 level should have the potential to inspire a round of more buying pressure towards 1850 level,” he said.
Nazri said any significant periods of weakness near term should be viewed as strong buying opportunities.
He 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 Ni Hsin Resources Bhd, Frontken Corporation Bhd, MMS Ventures Bhd, Kronologi Asia Bhd, Tiger Synergy Bhd, NovaMSC Bhd and Pasukhas Group Bhd.
“Strategy wise, given that the short term trend has turned positive toward 1850, traders should accumulate and capitalize on weaker ringgit and ride on upturns in ringgit-sensitive stocks and continuity of 2015 economic policies.
“These includes our Top Ten Featured Stocks ie. S P Setia Bhd, Hartalega Holdings Bhd, QL Resources Bhd, Bursa Malaysia Bhd, KPJ Healtncare Bhd, Unisem (M) Bhd, MAA Group Bhd, MBM Resources Bhd, Homeritz Corporation Bhd and Only World Group Holdings Bhd,” he said.