KLCI to rebound further, focus on 11MP measures

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KUALA LUMPUR (May 16): The FBM KLCI is expected to rebound further next week and stay above the crucial 1,800-point support level, with investor focus on the Eleventh Malaysia Economic Plan (11MP) to be tabled on May 21.

Treasury yields dropped and the dollar eased on Friday following a stabilization in European government bonds and another batch of weak U.S. data that raised expectations the Federal Reserve will need to wait longer to hike interest rates, according to Reuters.

U.S. stocks finished near flat, though the S&P 500 eked out another record closing high and major indexes posted gains for the week. The MSCI World equity index gained 0.26 percent and was up for the week as well, it said.

AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said that following the oversold performance of the local stocks (over the last three weeks) and successful test of 1,800 support level, he expects the FBM KLCI to stage further rebound driven by positive GDP data, rising local currencies and commodities price.

Nazri said despite the traditionally bearish month of May, investor focus was likely to be on the 11MP, on measures to boost Malaysian economic growth to a developed state.

“We project the 11MP which will use a new approach (Malaysian National Development Strategy, Creativity & Blue Ocean Strategy), to be a comprehensive blueprint to chart the direction of all economic sectors in the country towards 2020.

“The Mega Plan is likely to focus on Islamic Finance and Green Economy by focusing on innovation, knowledge abilities, socioeconomic inequalities, improve living quality, as well as institutional delivery,” he said.

Nazri, who is also the president of the Malaysian Association of Technical Analysts said that on the technical front, the FBM KLCI had been deeply oversold after correcting 3.2% since April 27 high (1,867) over past three weeks and now looks poised for further rebound.

He explained that key psychological levels were successfully recaptured, with the FBM KLCI and S&P 500 climbing back above the 1,800 and 2,100 psychological level.

“We reiterate that the FBM KLCI remains above its monthly uptrendline and thus any correction is a buying opportunity.

“The FBM KLCI ended a losing streak by closing marginally above the 1,800 level backed by some late buying activities. The local bourse should also get momentum from the admission of Westports Holdings Bhd as a member of MSCI Malaysia Index component stocks,” he said.  

Nazri said the benchmark index appeared to have a selling climax with bullish reversal morning star candlestick now spotted on daily chart.

“Key momentum indicators are also showing signs of revival, implying that buying support is emerging. Major oscillators, RSI and MACD are closed to issue buy signals. Moreover, higher than average daily trading volume, suggesting the pickup in institutional buying interests.

“With Malakoff Corporation Bhd IPO and 11MP being fresh catalysts to spur the buying momentum, we maintain our view that the FBM KLCI will find support at 1800 and should gradually trend higher towards 1830 level.

“Hence we continue to recommend our buy on support as we expect a higher technical rebound towards next major resistance at 1830 and 1840 levels,” he said.

Nazri said traders should look at AffinHwang’s Top Stocks that may benefit from the mega economic plan, rising ringgit and rising oil price namely Gamuda Bhd. IJM Corporation Bhd, Protasco Bhd, Ahmad Zaki Resources Bhd, Pintaras Jaya Bhd, MSM Malaysia Holdings Bhd, Fraser & Neave Holdings Bhd, Dutch Lady Milk Industries Bhd, YTL Power International Bhd, Nestle (M) Bhd, KPJ Healthcare Bhd, IHH Healthcare Bhd, Time Dotcom Bhd, Berjaya Auto Bhd, Sunway REIT, Pavilion REIT, IGB REIT, Perdana Petroleum Bhd, Alam Maritim Resources Bhd, Yinson Holdings Bhd, Petronas Dagangan Bhd, Petra Energy Bhd, Barakah Offshore Petroleum Bhd, Coastal Contracts Bhd and Dayang Enterprise Holdings Bhd.