KUALA LUMPUR (Jan 24): The FBM KLCI is expected to have more upside vibes next week in line with the uptrend at most global markets last week.
European stocks hit seven-year highs on Friday, continuing a rally ignited by the European Central Bank's plan for massive regional economic stimuli that also knocked the euro to 11-year lows, according to Reuters.
Wall Street mostly fell on soft corporate earnings news after the S&P 500 rallied 1.5 percent on Thursday on the ECB's $1 trillion bond-buying announcement, it said.
AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said that following the sharp reversal of the global stocks, he expect the local index to have more upside vibes, with the FBM KLCI to continue rebound driven by positive approval of Malaysian revised budget, stable oil price and a huge monetary easing in Europe.
Nazri said a strong finish in the Asian region offers a source of support, as well as optimism on more spill over upside after the ECB adopted a huge form of asset purchases.
Meanwhile, he said European shares and US equity markets pushed higher on track for their fourth consecutive higher close after the ECB decision on asset purchases.
Nazri, who is also president of the Malaysian Association of Technical Analysts, said that on the technical front, the daily stochastics had crossed over up which was a bullish indication.
He said momentum studies were trending higher from mid-range, which should support more upside if resistance levels are penetrated.
Nazri said the market's close above the 20-day and 50-day moving average suggests the short-term and medium term trend remains positive.
“Overall, the FBM KLCI showed a positive technical setup with major support now pegged at 1800 and 1780 levels while major area of resistance is spotted at 1850 and 1880 levels.
“Early support for the FBM KLCI comes with a strong showing in the finance related shares and energy oil gas shares which have been badly hit last month,” he said.
Going forward, Nazri said he expects more vibes to support the bull camp, with 1830 (200 day moving average) being the immediate target.
“On the domestic front, we would attribute the huge upside partially to Malaysia’s Revised Budget which shows strong government determination to cut fiscal deficit and focus on fiscal consolidation despite a prolonged slump in the oil price.
“We believe Prime Minister Datuk Seri Najib Razak’s statement that "Malaysia is not in crisis in respectably accurate, prudent and spotty indeed to align the country’s economy with the recent global economic developments.
“Strategy-wise, we maintain our Top Five weekly picks amidst the positive trend reversal (1) MISC Bhd for its resilient business model and its benefit from the current low crude oil price environment and rising eastbound Transatlantic trade (2) Tenaga Nasional Bhd under the utilities banner on tariff hike/energy reform (3) Public Bank Bhd on its strong franchise and loan and deposit growth track records which are always above industry average (4) Kossan Rubber Industries Bhd which is expected to capitalize on strong demand in the rubber glove segment on falling ringgit and (5)IJM Corporation Bhd’s construction order book will be significantly be boosted by the West Coast Expressway (WCE) and Kuantan Port expansion projects (thereby also boosting demand for piles) while its FFB production will surge as more oil palm plantation areas in Indonesia matures,” he said.