KUALA LUMPUR (March 21): The FBM KLCI is expected to build an upleg higher and stay above the 1,800 level next week in line with the firmer showing at most regional and global markets.
The U.S. dollar fell sharply on Friday and posted its biggest weekly decline against the euro in more than three years, helping to drive a rally in Wall Street stocks and crude oil, according to Reuters.
The Nasdaq posted its highest close in 15 years on Friday and had a weekly gain of 3.2 percent, it said.
Riskier assets like equities had a strong week in general, largely driven by the Federal Reserve's policy statement on Wednesday, which struck a more dovish tone than investors had expected. The Fed appeared to argue against an interest rate hike in June, said Reuters.
AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said following Bursa’s breakout above the 1,800 psychological resistance level, he expects the FBM KLCI to build an upleg higher, tracking strong showing of regional indices following latest Federal Reserve dovish statement and bigger stimulus from European Central Banks and People Bank of China.
Nazri said Bursa stocks staged a solid rally with a weekly FBM KLCI gain of 1.6% following the Federal Reserve’s surprise statement.
He said despite the depreciating ringgit, falling commodities, slowing consumption, impending GST and rising inflation, the FBM KLCI had gained a relatively robust 2.6% year-to-date and an impressive 7.7% from December 2014 low.
Nazri added that global equity markets should take a higher track as they continued to digest the latest bullish message from the US Federal Reserve.
“While the Fed removed the word "patient" from their post meeting statement, they conveyed a measured approach toward raising rates that was seen as market friendly and dovish,” he said.
Nazri, who is also president of the Malaysian Assoiation of Technoical Analysts, said that on the technical front, he saw an impressive turnaround with the FBM KLCI index gaining 25.1 points or 1.6% breaking the last three week downtrend session.
He said the turnaround turned the trend in the market in favor of the bull camp, with uptrend line support coming in at 1800 level.
“It is possible for the FBM KLCI to see more quiet accumulation and modest buying pressure near 1,800 level before it bounces back ahead,” he said.
As for trading strategy, Nazri said thematic 2Q2015 event plays like selected ringgit play, battered-down oil and gas stocks, Sarawak-based investments, Eleventh Malaysia Plan-related beneficiaries (High Speed Train, LRT/MRT, TRX and New Highway) were interesting investment propositions for the second quarter ahead.
“Our top ten picks for 2Q2015 in the large-cap space are as follow : (1) Gamuda Bhd : the best proxy to the MRT and Selangor Water Play (2) IJM Corporation Bhd : a defensive pick to the construction sector with solid orderbook and businesses showing commendable growth (3) Muhibbah Engineering Bhd: remains in a good position to secure jobs in RAPID and is our favoured mid-cap pick for exposure to RAPID when oil recover (4) Hartalega Holdings Bhd : beneficiary from falling ringgit and boost from additional capacity (5) Top Glove Corporation Bhd: beneficiary from falling ringgit and boost from internal expansion plan (6) Globetronics : beneficiary from falling ringgit and on recent commencement of mass production of a new LED sensor module (7) Unisem (M) Bhd : beneficiary from falling ringgit and is now on better footing from restructuring exercise (8) KPJ Healthcare Bhd : beneficiary of falling ringgit and medical tourism with new opening of hospitals and corporae exercise to unlock its property values (9) Tenaga Nasional Bhd : beneficiary from falling ringgit and winner from sustainable demand growth of 4-5% p.a. and potential tariff hike under the government subsidy rationalisation plan, and lower coal cost (10) Petronas Gas Bhd : a defensive play with steady recurring income, without exposure to the volatility in energy prices and may benefit from completion of Pengerang regasification plant,” he said.