KLCI to trend higher in line with global rally, bargain hunting

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KUALA LUMPUR (Dec 23); The FBM KLCI will likely trend higher and extend its gains today in line with the overnight rally at Wall Street and positive opening at most regional markets on Tuesday as sentiment is likely to be buoyed by the improving global outlook.

Asian markets should be well underpinned on Tuesday after Wall Street closed at historic highs while oil prices suffered a vicious setback after Saudi Arabia quashed all thought of cutting supply, according to Reuters.

The revival in risk appetites undermined the safe haven yen and kept the U.S. dollar elevated across the board, while sovereign bonds were content to consolidate recent gains, it said.

Equity investors chose to focus on the benefits that falling fuel prices would have for consumer spending power, said Reuters.

The slump in the local market between Dec 1 and Dec 19 which saw some RM111.52 billion in the FBM KLCI’s market capitalisation evidently has created bragain hunting opportunities on blue chips.

Despite there being some initial knee-jerk reaction to the falling crude oil prices which sent oil and gas-related stocks into a tail-spin, a new Internation Monetary Fund (IMF) blog suggests that the plunge in crude oil price to be a shot in the arm for the global economy.

In a blog Dec 22, the IMF’s Rabah Arezki and Olivier Blanchard said they found a gain for world DGP between 0.3% and 0.7% in 2015, compared to a scenario without the drop in oil prices.

Mewnwhile, AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said he expects Bursa Malaysia market to see more modest recovery bounce this week.

Nazri said volatility had picked up in recent sessions and was likely to continue after the post-FOMC meeting statement and Janet Yellen's press conference.

He said aggressive bulls might consider using a post-Fed meeting drop in the FBM KLCI as an opportunity to buy on dips for a corrective bounce back toward the 1730 and 1750 resistance area.