Bursa likely to trade higher, then retreat

by **Cals** Mon 21 Oct 2013, 08:08

Posted on 21 October 2013 - 05:40am

Kang Siew Li
[You must be registered and logged in to see this link.]

PETALING JAYA (Oct 21, 2013): The Malaysian stock market is expected to trade higher in the early part of the week before taking a breather midweek as traders may book profits after the recent rally, said analysts.

M&A Securities Sdn Bhd head of research Rosnani Rasul said guesstimates for the upcoming Budget 2014, which will be tabled on Friday, will keep the momentum going for the equity market this week.

"Nonetheless, in line with historical trends, the momentum will lose steam mid-way this week as some may take profits following the recent rally. Added with the heart beating economic announcements this week, we expect the local market to give up some points on a week-on-week basis," she said in a report last Friday.

Rosnani noted that several US economic announcements are due this week that could impact the global equity market including Malaysia's.

"Chief important that we should pay attention is the US housing-related statistics namely the new home sales, existing home sales, building permits and housing starts.

"In addition, we also should pay heed to the US unemployment rate for August and initial jobless claim. All these indicators will give a hint on the health of the US economy and hence, the timing of the (US Federal Reserve's) tapering," she said.

She also pointed to other key economic releases this week, including the eurozone's consumers' confidence and Purchasing Managers Index (PMI)-related numbers, Japan (trade and leading index), China (September property prices and HSBC Markit Flash PMI Manufacturing) and Malaysia (foreign exchange reserve).

On what to expect in Budget 2014, Rosnani opines that the local stock market has plenty to be excited about.

M&A Securities sees the consumers sector benefiting, with the anticipation of higher handout under the 1Malaysia People's Assistance (BR1M).

"In addition, the people can expect a gradual decrease in car prices, broadband and continuation of smart phones subsidies for below 20-year old age.

"We also expect the government to announce a half-month bonus or minimum RM500 for the 1 million government servants and 600,000 pensioners. Assuming that the amount budgeted is RM4 billion, a marginal propensity of spending will add about 0.3%-0.4% to 2013 gross domestic product, assuming that the bonus will be paid in December," Rosnani added.

The research firm believes that the potential losers in the budget will be the property market as the real property gains tax is expected to be tightened to keep in check the increase in property prices.

"Banks, unlike our previous prediction, will escape unscathed this time around as the government may likely opt for a more targeted approach to keep a lid property prices. Since it just recently revised the loan tenure of housing loan refinancing to a maximum 10 years, we don't see any further tightening in lending requirement in this coming budget," said Rosnani.

Rosnani also foresees the goods and services tax introduction rate to be in the region of 4%-5%. "This is neutral in our view and hence, minimal impact to the economy, if any. In line with this, there could be a wild card in corporate and individual tax cut."

The FBM KLCI gained 2.17 points or 0.12% to settle at 1,799.59 points on Friday. Gainers outnumbered losers, with 377 stocks ending higher and 331 stocks finishing lower.

Actively traded stocks included Westports Holdings Bhd, Xidelang Holdings Ltd, Malaysian Airline System Bhd, The Media Shoppe Bhd and Scomi Energy Services Bhd.

JF Apex Securities Bhd said the tone was somewhat mix throughout the day as local investors were in cautious mode ahead of the Budget 2014 tabling.

Trading volume decreased to 1.49 billion shares worth RM2.04 billion compared with Thursday's 1.74 billion shares worth RM1.75 billion.

Meanwhile, Alliance Research Sdn Bhd foresees the FBM KLCI will likely trade above the 1,805 level today.

An analyst at a local house told SunBiz that the stock market is set to continue to ride the upcycle, to challenge the psychological resistance level of 1,800 points and climb to the next resistance of 1,825.