Short-term technical rebound seen for M'sian stocks this week

OVERSOLD position and bargain hunting, which are arguable for a short-term technical rebound, are expected to lift shares on Bursa Malaysia this week, an analyst said.

Affin Investment Bank head of retail research Dr Nazri Khan said the FBM KLCI would rebound mildly higher this week and looked poised to test the 1,560-level, helped by more bargain hunting on the past two weeks' oversold situation.

“Despite bouts of soft economic readings (local and external data) and regional sell-down, we noted the FBM KLCI has shown a level of resilience against its regional peers,” he told Bernama.

He said the sentiment would also be influenced by rising expectations on the US, European and Chinese cooperation to boost economic growth and ideas that European leaders would compromise to resolve the region's debt issues.

“Last minute short-covering activities will also help to support the market,” he added.

Even with news that the EU summit had failed to produce any clear direction, coupled with the eurozone's disappointing economic data, the fact that local stocks had been able to rally suggested that the market had become oversold enough to rebound, Nazri said.

“While we believe equity valuations in the local market have fallen to more attractive levels, the recent jump in volatility will keep many longer-term investors away from the local market,” he added.

Nazri also advised traders to be defensive and to accumulate high-yield defensive small cap stocks in the telecommunications and utilities sectors this week, which might rebound further after experiencing deep correction in the past few weeks.

For the week just ended, the market was mixed and traded cautiously amid the uncertainty surrounding the eurozone crisis and positive sentiment on Wall Street.

On a Friday-to-Friday basis, the FBM KLCI added 18.66 points to 1,551.12.

The Finance Index rose 112.61 points to 13,824.75, the Industrial Index earned 3.51 points to 2,710.69 and the Plantation Index advanced 19.43 points to 8,177.72.

The FBM Emas Index jumped 98.48 points to 10,581.46, the FBM ACE Index was 44.63 points higher at 4,276.7, the FBM Mid 70 Index surged 184.99 points to 11,497.35 and the FBM T100 Index improved 44.63 points to 10,409.02.

Total weekly volume fell to 4.35 billion shares valued at RM6.14bil from 5.768 billion shares worth RM8.262bil.

The main market turnover declined to 2.87 billion shares worth RM5.92bil from 3.89 billion shares valued at RM7.97bil previously.

Volume on the ACE Market decreased to 958.33 million shares worth RM140.44mil from 1.3 billion shares valued at RM215.75mil. Bernama