KLCI week ahead Local market to remain firm, trend higher

by **Cals** Mon 25 Aug 2014, 03:34

KLCI week ahead Local market to remain firm, trend higher

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Saturday, 23 August 2014 08:13

KUALA LUMPUR (Aug 23): The FBM KLCI is expected to remain firm and trend higher next week on the back of some improving global sentiment.
Elsewhere, Wall Street and other stock markets paused on Friday, halting the week's strong gains, as worsening Ukraine tensions dogged trading, while the dollar rose after Federal Reserve Chair Janet Yellen said policymakerseyeing interest rate hikes need to move cautiously, according to Reuters.
Ukraine on Friday said Russia had launched a "direct invasion" of its territory after Moscow sent a convoy of aid trucks across the border into eastern Ukraine, where pro-Russian rebels are fighting government forces, it said.
Affin IB vice president and head of retail research Dr Nazri Khan said that going forward, he expect local market to remain firm, trend higher and gradually retest the all-time-high of 1896.23 level.
Nazri said local stocks should get momentum from world stocks performance (MSCI All World stocks and S&P 500) which recently hit five-year and all-time-high respectively with an impressive gain of 17.6% and 20.7% year-to-date, driven by a round of positive economic data and low interest rate despite the latest commodity volatility and elevated tensions in the Ukraine and Russia.
Nazri, who is also president of the Malaysian Assocation of Technical Analysts (MATA) said he expects 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 easy policy continuity and ease of geopolitical tension.
He said there was also another bullish wild card from European Central Bank President Mario Draghi who is scheduled to speak at Jackson Hole.
Nazri said global equity should get a huge relief rally if ECB hints at the possibility of a USA-like quantitative easing policy, which has been debated in Europe but that so far the ECB had declined to pursue.
He said investors should have better interest rate clarity on the normalisation of monetary policy after the much awaited Jackson Hole Bankers Central Bankers Conference following the strength of the USA economy and jobs market.
“On the technical front, we see strength across the board with FBM KLCI remain 2% below record territory supported by Wall Street at new all-time highs and Dow Jones Industrial Average back above the 17,000 psychology level,” he said.
Nazri said studies were showing positive momentum for the FBM KLCI but were now in overbought territory, so some caution was warranted.
Nazri said the market's short-term trend was positive on the close above the 20-day moving average.
He said the market had a positive tilt with the close over the 1860 support level.
“The 9-day Stochastics over 70 indicates the market is approaching overbought levels.
“The next area of resistance is around 1880 and 1900 levels, while major areas of support hit at 1860 and 1850 levels respectively,” he said.
Nazri said he expects the recent upward momentum in equity to continue given the steady follow-through Bursa performance during the last week session.
“We reiterate that the FBMKLCI 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.
“While local small caps consolidate with buoying sentiment, impressive rotational interest on large and mid-cap blue chips should showcase healthy risk taking with active foreign participation accumulating battered down blue chip stocks.
“Strategy wise, given that the short term trend has turned positive toward 1,880, traders should accumulate our last recommended Top Featured Stocks which include the likes of Gamuda, Bursa, IHH, IGB, Sunway, Westports, Econpile, Pintaras, Sentoria, Huayang, KSL and Matrix,” he said.