KLCI week ahead Short term turbulence for KLCI

by **Cals** Mon 21 Jul 2014, 02:08

KLCI week ahead Short term turbulence for KLCI

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Saturday, 19 July 2014 10:55

KUALA LUMPUR (July 19): The FBM KLCI is expected to stage a short term correction in the wake of the second local airline disaster as well as the firm rally over the past five months.
Elsewhere, U.S. stocks rebounded and European markets recovered a bit on Friday but the euro dipped below $1.35 for first time since February after a Malaysian airliner was downed in eastern Ukraine and Israel stepped up a ground assault in Gaza, according to Reuters.
Affin IB vice president and head of retail research Dr Nazri Khan said that on the domestic front, the merger of three big banks (CIMB Group Holdings Bhd, RHB Capital Bhd and Malaysia Building Society Bhd) should kick-start a new government reforms and liberalisation wave to boost investor confidence.
He said other local news that may be significant for short term investors included Public Bank to buy remaining the 50.0% in Vietnam bank, Malaysia's TDM to buy 95.0% stake in Indonesian plantation firm, Borneo Oil to propose a private placement to seek gold in Pahang, IJM Land Bhd to acquire a 40.0% stake in Kuantan Pahang Holding Sdn Bhd from SP Setia Bhd, MSM Holdings Bhd to seek a takeover to tap Russian market and finally Tan Sri Vincent Tan's MOL Global Inc to raise near RM1 billion from a major USA IPO. \
Nazri, who is also president of the Malaysia Association of Technical Analysts (MATA) said that on the technical front, the local benchmark appears to be forming a bullish cup and handle pattern sandwiched between 1,860 support and 1,880 resistance levels, with a slow sideways grind on lower volume.
He said the weakness below the bottom end of this range at 1,860 would favour a larger decline targeting 1,850.
He added that the near term bias in the local index clearly goes to the bear camp, with support at 1,860 and 1,850 levels while resistance coming in at 1,890 and ultimately 1,900 psychological level.
“Daily stochastics has turned lower suggesting a decelerating upside momentum but the market's close above the 50 and 200-day moving average is an indication the medium and long term trend still remain positive.
“Overall, despite the external blips, we expect the weakness to be temporary and the FBM KLCI to maintain its slow bullish edge (by the global liquidity and defensive appeal of Bursa) leading to another accumulation base before marching higher,” he said.
Nazri said that while aggressive investors may buy Affin IB Research’s Top Featured Stocks i.e. S P Setia, Huayang, Tambun Indah, YNH Properties, A&M, Crestbuilder, CMSB, OSK Properties, Yinson, KNM, Muhibah, Sumatec, Coastal, Fitters, KUB, TA and Prestariang Berhad while conservative bulls might consider buying index futures on dips toward 1860, positioning for a larger jump to all time high of 1,900.