KLCI week ahead KLCI to trade sideways, external factors to influence sentiment

KLCI week ahead KLCI to trade sideways, external factors to influence sentiment
Business & Markets 2014
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 22 March 2014 13:09

KUALA LUMPUR (March 22): The FBM KLCI is expected to trade sideways underpinned by external factors including the Ukraine-Russia tension and the US Federal Reserve’s earlier-than-expected-interest-rate-hike, amidst lack of fresh catalyst at the local market.

The prevailing trend in U.S. stocks could be higher next week if investor anxiety eases over the crisis in Ukraine and signs of weakness in the U.S. economy, according to Reuters.

Investors will watch for further signs that poor weather may have played a role in recent weak economic data and dampening profit outlooks, which would underscore views that setbacks may be temporary, it said.

Affin IB vice president and head of retail research Dr Nazri Khan said that going forward, he expects more range bound action after the global stock market recoup losses last week

He said the FBM KLCI is likely to trade sideways following the choppy reaction on Ukraine Russia tension, Federal Reserve earlier-than-expected-interest-rate-hike and ringgit volatility sentiment.

“Although we believe stocks should temporarily consolidates, positive signs from easing Russia geopolitical tension (no clear sanctions) and improved USA economy may indicate any weakness are good buying opportunities.

“The upside surprise seen in USA economic data should reinforce expectations that USA has overcome the slowdown in activity and will meet its normalised growth 2014 GDP target of 2.8%, benefitting most Asian trading partners,” he said.

Nazri said that on the technical front, despite the choppy FBM KLCI price movement since February (where it is trapped inside 1,800-1,840 sideway range), from a big technical perspective, the local benchmark is maintaining the firm uptrend that has been in force for the last five years (which has been tested four times successfully since 28th October 2008 - tested & rebounded Sep 2011, March 2013, August 2013 and latest February 2014).

He said that if this uptrendline extends, the FBM KLCI should be comfortably testing 1,900 by October 2014 and 2,000 by June 2015.

Nazri said all this suggest that any weakness is good buying opportunities with uptrendline being a good barometer to buy dips over the past five years.

“There remains robust major support in the 1810, 1800 to 1780 area and only a breach of 1780 zone along with a piercing of the lower trend channel would alter the last five year bullish bias,” he said.

“Our strategies therefore remain constant, given the tight range Bursa likely to demonstrate in the seasonally weaker April-May, we are advising our customer to buy on dips as we expect the prevailing consolidation to stabilize by late June just before the mid-year book is closed.

“As for stock picks, we are in favour of technical momentum stocks with CMSB, Hap Seng Plantations, IJM Corp, MKH, Jaya Tiasa, DKSH, Chintek, Tambun, Asiafile and Kim Loong remain our Top Ten featured stocks for next week,” he said.