TAKING its lead from another strong overnight rally on Wall Street, the FBM KLCI rose in early trade. However, it pared its gains by mid-morning as investor caution set in, but still managed to close in marginal positive territory.

The FBM KLCI eked out a small gain of 4.38 points or 0.25% to end at 1,732.44 points on Friday. However, the benchmark index is still down 1.7% year-to-date for 2015.

Interestingly, the average year end target for the FBM KLCI is 1,850, based on a survey of forecasts by 10 local research houses.

Although we continue to be shadowed by 1MDB’s woes and its potential impact on the ringgit and the banks, oil prices have started to stabilise and the ringgit has strengthened, albeit very mildly, to around 3.56 against the greenback.

Regionally, Hong Kong and Japan extended their advance, with Japanese stocks rising on speculation of increased stimulus. Stock markets in Europe and China, however, fell due to profit taking activities.

I continue to be cautious on the outlook of Malaysian equities and have therefore kept my portfolio unchanged with a high cash holding level. Even if crude oil prices start to stabilise, the recent sharp fall will have major repercussions on government finances, the economy and the ringgit.

Currently, I am only holding Willowglen, which rose 1 sen to 74.5 sen on Friday.

This article first appeared in The Edge Financial Daily, on January 12, 2015.