KLCI to test 1,850 level next week

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KUALA LUMPUR (April 4): The FBM KLCI is expected to test the 1,850-point level next week, building on its momentum from the first quarter of this year.

At the global markets, U.S. Treasuries prices rallied, the U.S. dollar fell and stock index futures fell on Friday after weaker-than-expected March U.S. jobs data, according to Reuters.

U.S. Labor Department data showed employers added just 126,000 jobs in March, the smallest monthly increase in more than a year. The figure was well below forecasts for a gain of 245,000, according to a Reuters poll of economists, it said.

U.S. equity index futures fell nearly 1.0 percent, with S&P 500 E-mini futures dropping 19.75 points to 2039.75 in thin volume in a 45-minute abbreviated session, indicating a weak open for stocks on Monday, said Reuters.

AffinHwang Capital IB vice president and head of retail research Datuk Dr Nazri Khan said that going forward, he expects the FBM KLCI to continue the upleg higher towards 1850 level, tracking positive global macro data, reduced geopolitical tension from Iran-USA nuclear deal and broad stimulus from European Central Banks as well as People Bank of China.

“We see reduced geopolitical tension after Iran and world powers finally agreed on the key parameters of a nuclear deal designed to restrict Tehran atomic programme.

“We believe the easing of the sanctions imposed on Iran now could reduce conflicts and bring higher crude oil supply which is positive for the global economy,”he said.

Nazri said that as a result, Bursa Malaysia equities ended the first quarter on an upbeat note as hopes that China would adopt further stimulus measures to bolster growth were supported by reduced Iran / Greece geopolitical tension and optimism over the forthcoming US earnings season.

He said that on the quarterly basis, the FBM KLCI closed the first quarter with 73 points or 4.2% higher.

“This is commendable as early 2015 is perceived to be a rough year for Bursa with GST implementation and soft Ringgit affect the sentiment,” he explained.

Nazri, who is also the president of the Malaysian Association of Technical Analysts, said that on the technical front, the FBM KLCI broke out above the 1,800 psychological resistance on late March, and tested this breakout points three times in the last four weeks and hit a new one month high last week.

He said trading had been choppy since early February, but the breakout above 1,800 was largely holding and bullish until proven otherwise.

“Bursa staying power at 1,800 will mark key support for future uptrend towards November 2014 high near 1,850 level,” he said.

On the stock front, Nazri said there were ample picks following the recent bullish reversal.

“Given the optimistic 2H2015 sentiment, we prefer blue chips that possess momentum capacity to rebound on event play after the recent sell-off.  

“Conservative investors should buy our Featured Stocks namely Bursa Malaysia Bhd, Cahya Mata Sarawak Bhd, Hartalega Holdings Bhd, Unisem (M) Bhd, IHH Healthcare Bhd, Westports Holdings Bhd, KPJ Healthcare Bhd, Gamuda Bhd, IJM Corporation Bhd, Kossan Rubber Industries Bhd, Faber Group Bhd and Time Dotcom Bhd.

“Finally aggressive investors should long index futures and buy selective warrants namely Sunway WA, Inari WB, ECOWLD-WA, Mitra WC, KPJ WB, SKPRES-WA and mostly all FBMKLCI warrants ie. FBMKLCI-CO, FBMKLCI-CJ, FBMKLCI-CK, FBMKLCI-CM and FBMKLCI-CN,” he said.