KUALA LUMPUR (Feb 7): The FBM KLCI is expected to trend higher next week on rising risk-raking sentiment.
At the global markets last Friday, the dollar and U.S. government debt yields jumped on Friday as a strong American labor market report raised expectations that the Federal Reserve will increase interest rates by mid-year, according to Reuters.
Wall Street initially rose and European equities hit a seven-year high on the Labor Department report that showed solid U.S. job growth, with wages rebounding strongly. More than one million jobs have been created over the past three months, the first time that has happened since late 1997, it said.
Affin IB vice president and head of retail research Datuk Dr Nazri Khan said the local equity market should take a higher track next week, supported by a slow boost in risk-taking sentiment, ideas that calmer conditions has return on soaring oil prices, stronger ringgit, easing tensions over Greece and further central bank policy accommodation.
In addition, he said the huge takeover deal in the USA pharmaceutical sector, with Pfizer announcing the US$17 billion acquisition of Hospira, should also pave the way global appetite to resume its upward momentum.
Nazri said there were sharp falls for global treasury bond prices and dramatic increase in price of commodities worldwide.
He explained that capital expenditure cuts by major oil producers and industry data showing a drop in the number of global rigs in operation have supported the rebound.
Generally, Nazri said local shares on the FBM KLCI had been able to recoup from the previous week plunge and recover from their worst levels following a better external front and stronger than expected global data.
He said oil gas stocks were big gainers (SapuraKencana Petroleum Bhd, Bumi Armada Bhd, KNM Group Bhd, Sumatec Resources Bhd, Barakah Petroleum Bhd, Benalec Holdings Bhd, Perisai Petroleum Teknologi Bhd) on the local front, while plantation (Kulim (M) Bhd, Kuala Lumpur Kepong Bhd, IOI Corporation Bhd) were slowly helped by rising crude palm oil prices (RM2297/barrel up 1.8% w-o-w).
Nazri, who is also the president of the Malaysian Association of Technical Analysts, said that on the technical front, the daily stochastics had crossed over up which is a bullish indication.
He said momentum studies were trending higher from mid-range, which should support more upside if resistance levels are penetrated.
He 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 1,800 and 1,780 levels while major area of resistance is spotted at 1,830 and 1,850 levels.
“Early support for the FBM KLCI comes with a strong showing in the finance related shares, plantation and energy oil gas shares which have been badly hit last month,” he said.
Nazri said that going forward, he expects more vibes to support the bull camp, with 1,830 (200 day moving average) being the immediate target.
He added that the weaker ringgit was not a major concern but indeed was an advantage to Malaysia exporters and broad economy.
“As for this week, we feature top five stocks for medium term holding ie Public Bank Bhd, Astro Malaysia Holdings Bhd, Inari Amertron Bhd, Globetronics Technology Bhd and TDM Bhd.
“Public Bank is a highly defensive stock with superior management’s execution strategies and solid earnings buffer. Astro Bhd is currently strong given its resilient business model with visibly strong 3-year earnings and high dividend yield. Inari Amertron Bhd is also a favourite given its exciting growth prospects due to its strong exposure on the fast growing smartphone and tablet markets. Globetronic Bhd is promising due to its aggressive approach on new customer base following the introduction of new wearable consumer electronic devices. TDM is also featured due to its latest capacity expansion of its hospitals in Pahang, Terengganu and Kuala Lumpur,” he said.