KUALA LUMPUR (Dec 1): Bursa benchmark indices should regain their upward momentum this week as Asian stocks ride on a batch positive external economic releases, but sentiment may remain tepid on declining crude oil prices.
At the global markets, crude oil tumbled on Friday, knocking down both energy-related shares and currencies after OPEC's decision a day earlier not to cut output reinforced prospects of a worldwide oil supply glut, according to Reuters.
The dollar mostly strengthened following the decision by the Organization of Petroleum Exporting Countries on Thursday, a move that slammed commodity currencies like the Norwegian crown, which fell to five-year lows against the greenback and the euro, it said.
AffinHwang vice president and head of retail research Datuk Dr Nazri Khan said he expects more bullishness for the global stocks as a flurry of mega merger and acquisition activity and some encouraging German and China economic data added to the bullishness from a bout of central bank dovishness.
He said despite a flat local market, Chinese and Hong Kong equities rally (3.9% and 2.4%, biggest one day gain in a year) should lead the Asian market as they respond to the bullish unexpected cut in interest rates by the People’s Bank of China (a surprised 40 basis point reduction to the benchmark one-year lending rate, its first broad easing of monetary policy since 2012) as well as reports that further easing could be in the pipeline to boost growth and head off slowing inflation.
Meanwhile, Nazri said the outlook for the Eurozone economy appeared to improve as Germany’s IFO index of business confidence (best single leading indicator for the German economy) rose for the first time in seven months. Given the sharp turnaround in Germany business expectations, there is some hope further down the road that the German-led European economy will shift into higher gear in the first quarter of 2015.
Nazri, who is also the president of the Malaysian Association of Tchnical Analaysts, said that on the technical front, Bursa Malaysia’s volume trend and oscillator indicators were rising which suggest positive accumulation momentum which for more upside towards November high of 1860 level.
He said the FBM KLCI close above the 20-day and 50-day moving average is also a positive short-term indicator for trend.
“Although the broad market could be vulnerable for a quick profit-taking, the sharp reversal gains from the mid-October low (FBM KLCI gained 91 points or 5.1%) should give the local bull camps the longer term edge.
“On the news front, there are plenty of business news which will catalyse Bursa market next week,” he said.
“On the bigger picture domestic front, we believe the UMNO ruling party convention should also be stronger near term catalysts for local sentiment.
“Any positive surprise in the 65th UMNO convention (PWTC Trade Centre, November 25th-29th) should draw more bulls back into Bursa,” he said.
Nazri added that he believed the current weakness spotted since August 2014 was a temporary sign of the local market “catching its breath” after its strong rally from January to July (which registered a total of 127 points or 7.2%).
“Strategy wise, aggressive investors should long index futures while conservative investors should accumulate Budget-2015-linked-GLC and UMNO-linked-stocks which includes the likes of Tenaga Nasional Bhd, Gamuda Bhd, Cahya Mata Sarawak Bhd, Telekom Malaysia Bhd, Westports Holdings Bhd, Time Dotcom Bhd, Masterskill Education Group BHd, Malaysia Building Society Bhd, Hap Seng Plantations Bhd, Jobstreet Corporation Bhd, GD Express Carrier Bhd, Mitrajaya Holdings Bhd, My E.G. Services Bhd, Berjaya Food Bhd, Tecnic Group Bhd, MMS Ventures Bhd, Solid Automotive Bhd and Scientex Bhd,” he said.