KLCI to remain steady, trend higher

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KUALA LUMPUR (Feb 27): The FBM KLCI is expected to remain steady and trend higher next week, riding on the firming ringgit and improved local investor sentiment.

The U.S. dollar jumped on Friday and Wall Street's stock rally faded as fresh economic data kept alive Federal Reserve rate increases, while oil prices turned negative late in the session, according to Reuters.

The S&P 500 ended slightly lower but finished the week up 1.6 percent. Europe's FTSEurofirst 300 stock index tallied a 1.6-percent rise on Friday, fueled by strength in mining shares as industrial metals such as copper and aluminum gained, it said.

AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said despite a big drop in China Shanghai stock market and 'Britain Exit European Union' fears (BREXIT), he expects Bursa FBM KLCI to remain steady and trend higher driven by improved ringgit, rising oil, breakouts in Wall Street on potential global central bank stimulus and growing conviction on absence of Federal Reserve interest rate hikes in the near term.

Nazri, who is also president of the Malaysian Association of Technical Analysts, said that on the technical front, the local benchmark FBM KLCI has corrected 20.1% since July 2014, before scoring an impressive 10% rally between August 25 to year-to-date, led by two best performing sectors namely Technology & Industrial Product sector which benefit from weaker ringgit.

He said as for this week, the FBM KLCI remained flat for the third week, driven by 1650 and 1680 trading range.

Nazri said on the back of lacklustre trading volume, market breath showed a flattish picture (with 350 weekly losers overwhelming 320 weekly gainers).

He said the benchmark index has formed a bullish morning star candlestick, settling above its resistance level of 1,650. Indicator-wise, the Stochastic has gone into positive region to signify that further upside is on the cards.

Nazri said that with more inspiring catalyst and growing confidence over the global economic health, the FBM KLCI could trend higher this week.

“Next overhead resistance levels are seen at 1680 and 1700 while supports are seen at 1630 followed by 1650).

“Overall, we reiterate our view that the local bourse will trend higher on potential Central Banks stimulus and absence of Fed interest rate hike,” he said.

Nazri said with the underlying trends of strengthening Ringgit and Crude oil prices, we sense a good buy investment strategy now especially on emerging trading interest in Plantation and Oil & Gas stocks.

“Hence, we prefer a short-term rebound play on Plantation & Oil & Gas counters, especially those trading near trough valuations and having improved technical momentum such as SapuraKencana Petroleum Bhd, Alam Maritim Resources Bhd, Coastal Contracts Bhd, Perisai Petroleum Teknologi Bhd, Kuala Lumpur Kepong Bhd, IOI Corporation Bhd, Kulim (M) Bhd, Genting Plantations Bhd and Batu Kawan Bhd,”he said.