KLCI to get respite, trend between 1,700-17,40 level

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KUALA LUMPUR (Aug 3): The FBM KLCI is expected to get some respite from the performance of global markets and trend between the 1,700-1,740 level this week.

The dollar tumbled and benchmark U.S. Treasury yields touched multi-week lows on Friday as an unexpectedly weak government reading of American labor costs dulled prospects for higher U.S. interest rates, according to Reuters.

Wall Street stock prices rose, also taking a cue from the Employment Cost Index data showing the smallest quarterly increase in 33 years. Oil prices declined for a second day on growing worries about global oversupply, it said.

AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said that going forward, he expects the local market to get some respite from the positive performance of global stocks, the rebound in Chinese market after the recent selloff and the steady ringgit following the Prime Minister cabinet reshuffle, Standard Poor reaffirmation on Malaysia rating and a respite in oil price. Global stocks react positively in response to the latest policy statement from the US Federal Reserve, which suggested that the economy in the USA is solid and the central bank is on track to increase rates this year.

Nazri, who is also president of the Malaysian Association of Technical Chartists, said that on the chart, the FBM KLCI showed some inspiration from the cabinet reshuffling, as it rebound 15 points from the low of 1695.66 to settle higher while ringgit remains impressively steady at RM3.815 despite rising USA dollar index.

“Although the FBM KLCI remains below all major moving averages (20 day, 50 day and 200 day), the benchmark managed to remain above the key 1,700 psychological level while both average daily trading volume and value remain steady 1.6 billion shares and 1.5 billion ringgit respectively.

“We also continue to see performance of our benchmark index was lifted by buying in heavy weight counters such as Westports Holdings Bhd, Sime Darby Bhd, SapuraKencana Petroleum Bhd and Astro Malaysia Bhd,” he said.

All in, Nazri said he continued to reiterate his view that the FBM KLCI was likely to trend sideways between 1700 and 1740 as it does over the past six weeks.

“Given the deep price correction over the last six weeks, the FBM KLCI should be more attractive to long term investors as the discount to consensus year end index target has widened significantly and the FBM KLCI premium has also been narrowing against Asian regional peers.

“For long-term traders, it is timely now to consider bottom-fishing stocks, especially the bashed down big caps from FBM KLCI, which are trading near their respective 52-week lows,” he said.