Shaky start, strong finish likely for KL stocks

Stocks that could be on investors' radar include SP Setia, Eastern & Oriental, Berjaya Corp and Hexagon Holdings.


THE Malaysian stock market may see a shaky start but could end the week strong as the US lawmakers are likely to raise its debt limit, reducing the fears of a possible US downgrade or default.

Local stocks may see the week begin with a decline, taking cue from the poor stock market performances in the US and Europe.

Last Friday, the US stock market suffered five consecutive days of decline, driving the Standard & Poor's 500 Index to its biggest weekly loss in a year. The index also suffered a third straight monthly loss, the longest streak since 2008.

Meanwhile, the Dow Jones Industrial Average fell by 0.8 per cent or 96.87 points on Friday, representing its sixth consecutive day of decline.

Investors will be keeping a close watch on the developments in the US, whether or not a deal is reached by the US lawmakers on raising the federal government's debt limit. The deadline for lawmakers to reach a deal is tomorrow, when rating firms may decide to downgrade the country's credit rating.

Although rating agency Moody's signalled that it probably will not downgrade the US' triple-A credit rating immediately, even if there is no deal to raise the debt ceiling, it said a cut could come in the medium term.

It added that the US will still have enough money to pay its debts to bondholders after Tuesday.

Meanwhile, rival rating agency Standard & Poor's has warned it could cut the rating soon if there is no deal to address the underlying budget problems.

So far, news reports indicated that a deal is likely to be reached, that could involve raising of debt limit and cut in spending.

"Markets don't like uncertainties, and it appears like it will continue to be bearish until the lifting of the US debt ceiling does not materialises. Nevertheless, this would only be a short-term solution," said an analyst.

The good news is that the local stock market is not likely to see a sharp decline as local banks are able to weather the crisis.

Analysts believe that these banks have minimal exposure to US denominated bonds and are well capitalised.

The FTSE Bursa Malaysia KLCI (FBM KLCI), which started the week at 1565.06 points, fell by 1.03 per cent last week to 1548.81, outperforming the US market. Year to date, the FBM KLCI has appreciated by 1.9 per cent or 29.90 points.

Analysts said the immediate support level would be at around the 1,540-45 levels, while the resistant level is around the 1,560 level.

Stocks that could be on investors' radar include SP Setia Bhd, Eastern & Oriental Bhd, Berjaya Corp Bhd and Hexagon Holdings Bhd.

Last week, it was reported that major shareholders of SP Setia plan to buy a strategic stake in E&O. On Friday, BCorp announced that it would buy 85 per cent stake in DSG Holdings Ltd, which is involved in water supply and waste water treatment projects in China.