Friday 29 Mar 2024
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KUALA LUMPUR (Dec 20): The FBM KLCI is expected to continue its rebound next week, despite the Christmas holiday-shortened trading, riding on the better global sentiment on the back of improving crude oil prices and year-end window dressing activities.

Equity markets worldwide extended the week's rally on Friday and oil prices rebounded from recent lows, as investors closed out the last full week of trading in 2014 on an upbeat note, according to Reuters.

Wall Street rose, and the S&P 500 came within a few points of its closing record high. The index has gained 5 percent since Wednesday for its best three-day stretch since 2011, it said.

AffinHwang Capital IB vice president and head of retail research Datuk Nazri Khan said following the sharp reversal of the global stocks (MSCI All World & FTSE All World up 2.1% & 2.3%), he expects the FBM KLCI to continue its rebound.

He said the FBM KLCI’s  upside next week (albeit with a more volatile session) would be driven by dovish Fed statement, positive global economic data (USA Industrial Production , Germany PMI, France PMI & Europe Trade Balance), mild jumps in oil price and wilder upside swings of Wall Street and Asian regional indices ahead of the New Year window dressing.

Nazri said global equities extended gains as market participants digested the latest policy statement from the Federal Reserve.

“We see signs local equities tried to recover from last week sharp selloff and braced for more upside session after the positive Fed decision. In fact, foreign stocks tied to oil like Malaysia (+1.5%), Brazil (+4.8%) and Russia (+10%) also jumped sharply on upside reversal of oil price,” he said.

Nazri however cautioned that there were still risk ahead with position-squaring before the New Year, fragile commodities price, declining emerging market currencies, economic growth concerns from Russia and the Greek uncertain election process.

“We believe Bursa Malaysia market will see more modest recovery bounce next week.

“Volatility has picked up in recent sessions and is likely to continue after the post-FOMC meeting statement and Janet Yellen's press conference,” said Nazri.

Nazri, who is also president of the Malaysian Association of Technical Analaysts, said aggressive bulls might consider using a post-Fed meeting drop in the FBM KLCI as an opportunity to buy on dips for a corrective bounce back toward the 1730 and 1750 resistance area.

He said the support areas were now pegged at the 1,700 and 1,680 level while resistance are tagged at 1,730 and 1,750 levels.

“Despite the current global volatility we remain optimistic and maintain year-end 2014 and 2015 KLCI target of 1,860 and 2,000 (based on an unchanged 16x forward PE) respectively.

“Decent local earnings growth for 2015 of 8% (excluding Malaysian Airline System Bhd, which is being privatised) is still positive for broad market on the back of the strong Malaysian and regional economies, huge domestic liquidity, prospects of upgrade for Malaysia by ratings agencies (following prudent 2015 Budget, subsidy rationalisation and fiscal consolidation) as well as signs of continuing improvements in the USA economy that help Malaysian exports,” he said.

Nazri said that strategy wise, traders should use any dips to position for better year ahead.

“Our Top Five picks are WCT Bhd in the construction and infrastructure sector on expanding order book, Tenaga Nasional Bhd under the utilities banner on tariff hike/energy reform, AirAsia Bhd which is expected to be in a recovery mode from falling oil price within the transportation industry, Kossan Rubber Industries Bhd which is expected to capitalize on strong demand in the rubber glove segment on falling ringgit and  Malayan Banking Bhd for its quality assets and attractive 5.6% dividend yield amidst the defensive broad market sentiment,” he said.

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