KUALA LUMPUR (June 27): The FBM KLCI is expected to stage further correction next week with 1,700 points seen as the immediate target as the spectre of the Greece debt crisis continues to weigh on global markets.
World stock markets slipped and the euro fell on Friday, with investors cautious ahead of a meeting in Europe that could decide whether Greece will default on loans, according to Reuters.
The S&P 500 ended nearly flat, though shares of U.S. chipmakers fell after a weak forecast from Micron Technology Inc, it said.
AffinHwang IB vice president and head of retail research Datuk Dr Nazro Khan saoid that following the bearish performance of the global stocks, he expects the FBM KLCI to stage further correction with 1,700 as the immediate target weighed down by Greece failed negotiations, ringgit renewed weakness, negative global data, potential Federal Reserve rates hike and absence of local catalyst.
Nazri noted that the global stocks had drifted lower and the safe haven such as Dollar and Yen had edged ahead as a lack of progress in “cash-for-reforms” talks between Greece and its creditors made for an extremely cautious session.
On the domestic front, Nazri said he expects the ringgit depreciation to encourage more medium term investment particularly on FDI and bond portfolios.
“In currency markets, the ringgit continued to depreciate 1% against the US dollar at 3.7610, while against the Singapore dollar was down 1.5% to 2.8005.
“It is likely that new investors will grab the temporary opportunity in the undervalued weaker ringgit environment as it offered a cheap entrance point to the medium to long term FDI and bond market.
“This is true given that Malaysia has sound fundamentals and robust banking policy,”he said.
Nazri , who is also president of the Malaysian Association of Technical Analysts, said that overall, he expect the local market to continue be trapped in the two-month downtrend channel (where the FBM KLCI has corrected 153 points or 8.1% since 27th April 2015).
He said that with th elack of price catalysts and the on-going domestic GLC saga, market sentiment was likely to remain lacklustre this week with trading focus remains on ringgit play and second liners.
“We expect higher volatility in ringgit and commodities and therefore do not rule out a more volatile market condition in near-term.
“Strategy wise, conservative investors should stay out while aggressive investors should short index futures while accumulate our selective Top Buys driven by ringgit play second liners and exporters namely Top Glove Corporation Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, KPJ Healthcare Bhd, Globetronics Technology Bhd, Hap Seng Consolidated Bhd, Westports Holdings Bhd, KPJ Healthcare Bhd, SKP Resources Bhd, Harbour-Link Group Bhd, Heveaboard Bhd, YSP South East Asia Holdings Bhd, Willowglen MSC Bhd and Homeritz Corporation Bhd,” he said.