KLCI week ahead Firmer market action to lift index

KLCI week ahead Firmer market action to lift index
Business & Markets 2014
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 01 March 2014 13:58

KUALA LUMPUR (March 1): The FBM KLCI is likely to extend it gains next week and start March 2014 on firmer footing as most global markets continued to power up last week.

The FBM KLCI capped a volatile February with a gain of some 31.6 points month-on-month.

Affin Investment Bank vice president and head of retail research Dr Nazri Khan said that going forward, he expects the local market to remain firm, trend higher and retest mid-December high of 1,850 level as traders increase their bets on bullish Federal Reserve testimony and on an imminent recovery of the global financial system.

Nazri added local stocks should get momentum from world stocks performance (MSCI All World stocks and S&P 500) which hit five-year and all-time-high respectively with an impressive gain of 16.5% and 24.5% year-to-date, driven by a round of positive economic data despite renminbi volatility and elevated tensions in the Ukraine and Russia.

“We expect many Asian bourses including Bursa to play catch-up, with MSCI All-World and FTSE All -World equity index rose to its best close since May 2008 following Federal Reserve policy continuity and resolution of USA twin tapering and debt limit concerns.

“Year-to-date, the FBMKLCI fell only about 1.7% and had recouped most of that loss in just two weeks. Although fears of pre-emptive Russian military intervention and a break-up of Ukraine remained a risk, global stocks continue to power up,” he said.

Nazri said this could be attributed to the Federal Reserve chairwoman who delivered a bullish second testimony to Congress which sprang no downside surprises on the markets.

He said the recent sharp fall of China’s renminbi had shown signs of fading.

He added many believed the decline had been architectured by the People’s Bank of China to increase volatility and now had reached some stability.

Nazri said Eurozone monetary policy was also in focus, as a drop in German consumer price inflation would increase the pressure on the European Central Bank to further ease policy at the next meeting, propelling the global market higher.

He said that on the technical front, following four unsuccessful attempts over the past two week, the FBM KLCI finally punched through above 1,830 level to a new six week high following a series of positive raft of USA, Europe & Japanese economic data (USA Durable Good Order, Germany Unemployment, Japanese Industrial Production).

Nazri said the upside penetration of the FBM KLCI to close above the psychological resistance of 1,800 and 1,830 levels would open up upside possibilities of a new leg towards 1,850 level over the medium term.

On the market breadth, the KLCI recouped 14.21 points (week-on-week) as losers edged gainers 453 to 366 on slower average trade totaling 2.3 billion shares worth RM2.05 billion.

He said from the intermarket analysis perspective, the stronger leadership by economically-sensitive groups (Oil Gas, Construction, Technology & Properties) and stronger gain from smaller cap stocks (FBMSmallCap & FBMAce) suggested healthy momentum in the near term.

“We reiterate that the FBM KLCI remains above its monthly uptrendline and thus is in a secular bull market.

“That means any significant periods of weakness this year should be viewed as strong buying opportunities,” he said.

Nazri said that while local blue chips consolidated with buoying sentiment, impressive rotational interest on local small caps should showcase healthy risk taking with active retail participation accumulating penny stocks such as Data Sonic, Sona Petroleum, Daya Materials, Manage Pay, Tadmax, Asiapac and TH Heavy Engineering.

“Strategy wise, given that the short term trend has turned positive toward 1,850, traders should accumulate and capitalize on weaker dollar and ride on upturns in economically-sensitive sectors.

“While conservative investors may buy our roadshow Ten Featured Stocks i.e. Coastal, Yinson, Takaful, Jobstreet, Metro Kajang Holding, Inari, Uzma, THHeavy and Tambun, aggressive bulls might consider buying index futures on dips toward 1,830, positioning for a larger jump to all time high of 1,877,” he said.