KUALA LUMPUR (Nov 21): The FBM KLCI is expected to trend sideways next week with a likely trading band of between 1,660-1680 points, as the local market continues its consolidation phase.
Shares in major markets gained on Friday and the euro weakened against the dollar as investors anticipated actions by U.S. and European central banks next month, according to Reuters.
The benchmark U.S. S&P 500 posted its best week in almost a year, while Europe's main stock index tallied its strongest week in a month. U.S. Treasuries prices fell, with rising U.S. stock prices reducing the appeal of lower-yielding government debt, it said.
AffinHwang IB vice president and head of retail research Datuk Dr Nazri Khan said that going forward, he expects the local market to trend sideways within its 1660 - 1680 trading band following the anticipation of Federal Reserve hikes in the upcoming 15th-16th December meeting but added that sentiment should be well supported by the impending stimulus of Europe, year-end small cap play and the second landmark trip of USA President Obama to formalise Malaysia-USA economic collaboration.
He said that the local benchmark, the FBM KLCI had corrected 3.8% since mid-October, after scoring an impressive 14% rally between 25th August to 19th October 2015, led by the two best performing sectors namely Technology & Industrial Product sectors which benefited from the weaker ringgit.
Nazri, who is also president of the Malaysian Association of Technical Analysts, said that on the technical front, the local bourse remains range bound, well supported at the 1,660 level although it failed to track the stronger regional performance which benefited from the overnight boost in Europe and Wall Street, after the US Fed announced its confidence that the economy is accommodative for an interest rate raise in December.
“Market breadth was still bullish with the bulls beating the bears with 480 advance counters vs 420 decline counters respectively.
“We see an unexciting sideways consolidation on the FBM KLCI technical picture with dry volume, as the benchmark index continues to hover above its 1,660-1650 psychological support level,” he said.
Nazri said that overall, with investors banking on the launching of TPPA and the return of small cap risk appetite as well as hoping for a crude oil price recovery, the FBM KLCI could possibly trade sideways between 1660 - 1680 bands before looking to retest its psychological level of 1,700 in the near-term.
“Sector wise, we see ample play on FBMAce & FBMFledgling small cap stocks due to the approaching Chinese New Year rotation play such as Instacom Group Bhd, XOX Bhd, Rexit Bhd, Spring Gallery Bhd and ES Ceramics Technoolgy Bdh.
“Strategy wise, aggressive investors should long index futures on weakness while conservative traders should accumulate our Top 15 stocks in 2016 namely My E.G. Services Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd, Top Glove Corporation Bhd, Evergreen Fibreboard Bhd, Petronas Dagangan Bhd, IHH Healtcare Bhd, Cahya Mata Sarawak Bhd, Globetronics Technology Bhd, Inari Amertron Bhd, QL Resources Bhd, KPJ Healthcare Bhd, Time Dotcom Bhd, Hap Seng Consolidated Bdh and Westports Holdings Bhd,” he said.