KLCI week ahead KLCI to end correction, push higher

by **Cals** Sun 21 Sep 2014, 19:09

KLCI week ahead KLCI to end correction, push higher

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Friday, 19 September 2014 19:00

KUALA LUMPUR (Sept 19): The FBM KLCI is expected to end its consolidation phase and trend higher in line with most global markets next week, on the back of a more dovish US Federal Reserve stance, the Scottish referendum results and the People Bank of China’s fresh liquidity injection.

Dr Nazri Khan, Affin IB vice president and chief chartist, said despite US Federal Reserve monetary stance dominating market thinking for most of the session, global stocks had a relatively good time, pricing in the stronger-than-expected USA economy.

He said, on the Asian front, the report that the People’s Bank of China would provide the country’s five biggest commercial banks with Rmb500 billion of liquidity to stimulate flagging growth, would help bolster Asian stocks.

He said investors regarded this action as another small targeted easing move to benefit all interest rate sensitive stocks.

Nazri, who is also president of the Malaysian Association of Technical Analysts, said on the technical front, the FBM KLCI saw a tight and choppy trading range ahead of the Wall Street opening, as it consolidated last week downside breakdown action.

He said a measure of support came with a late rebound in the finance and properties shares, supported in part by Bank Negara maintaining accommodative overnight policy rates (OPR) of 3.25%.

“Late week push in the FBM KLCI back above 1840 turns the short-term trend in the market in favour of the bull camp, with resistance coming in at the September 12th and 29th August contract high near 1870 and 1880 respectively.

“Swing low support levels for the index stand at 1840 and 1800 respectively," he said.

Nazri said a close over the 200-day moving average would indicate that the longer-term trend could be turning up.

He added that rising momentum studies (RSI, Stochastics & MACD) in the positive zone would reinforce higher price action next week.

“Finally, on the domestic front, the upcoming Budget 2015 (scheduled on Oct 10) and the impending launching of 2014 biggest mega IPO namely 1MDB, Iskandar, Weststar and Carimin Berhad should be market positive.

“We expect these two catalyst to raise foreign investors' interest, attract more Bursa foreign inflows and spur the market in the traditionally bullish year-end-season,” he said.

Nazri said while local blue chips consolidate with buoying sentiment, impressive rotational interest on local small caps should showcase healthy risk-taking with active retail participation accumulating penny stocks such as KTB, Teck Seng, Pasukhas, Nexgram and Efficen.

He said the fact that interest rates remained low and the Malaysian economy performed strongly in the first half of 2014 with real GDP growth of 6.3% year-on-year(higher than all other major countries in the Asia-Pacific other than China), should eventually translate into higher FBM KLCI price.

“Strategy wise, given that the short term trend has turned positive towards 1,870, traders should accumulate and capitalise on weaker ringgit and ride on upturns in economically-sensitive sectors before the bullish year-end,” he said.

Nazri said while conservative investors might buy Affin IB’s weekly roadshow 15 featured stocks, namely, Maybank, Hong Leong Bank, Bursa, Westports, Sunway, CMSB, SunReit, IGBReit, Hong Leong Ind, Matrix, Gabungan Aqr, Scientex, DNEX, BJAuto and Pasukhas Berhad, aggressive bulls might consider buying FBM KLCI index futures on a breakout above 1850, positioning for a larger jump to an all-time-high of 1900.