KLCI week ahead KLCI to carry rally into New Year

by **hlk** Sun 08 Dec 2013, 01:06

Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com
Saturday, 07 December 2013 14:36
A + A - Reset
KUALA LUMPUR (Dec 7): The FBM KLCI is expected to sustain its
positive run going into 2014, on the back of favorable global economic
data, continuous carry trades and commodity/plantation sector strength.
The FBM KLCI ended last Friday at a fresh record high, rising 2.09
points to end at 1826.95.
Analysts in general expect the momentum to continue and for the KLCI
to strengthen further, as the local benchmark is anticipated to have
more market inertia to carry the current rally higher.
Affin IB vice president and head of retail research Dr Nazri Khan said
that going forward he expects local equity to maintain bullish bias on
positive global economic data, continuous carry trades and
commodity/plantation sector strength.
“Given the extent of the FBM KCLI strong rally last four month (a
whopping gain of 9.9% over September-December), we believe the
local benchmark should have more market inertia to carry the current
rally higher at least to end of January 2014,” he said.
Nazri said that on the domestic front, Bursa Malaysia should get
significant catalyst from a strong commodity bounce with crude palm oil,
light crude oil, gold and copper made big short-covering-rallies (gaining
1.6%, 8.2%, 1.3% and 1.5% respectively week-on-week) with
plantation sector leading the rest of the broad market (gaining 1.4%
week-on-week).
He said that based on the ringgit/Yen performance, there are continuous
evidence of positive carry trades with ringgit/yen maintaining a fresh
five-month peak of 31.69 the highest since July 2013, a reflection of the
speculators rotational purchases of higher-yielding assets from Japan to
ringgit assets.
“On the technical front, we believe the FBM KLCI is completing a bullish head and shoulder pattern and is now preparing a
support platform to jump higher after making a bullish breakaway gap at 1825-1818 and hit all-time-intraday high at 1840.12
early last week.
“There has also been a notable increase in trading volume during the last three days tight range, and that keeps the near term
bias in favour of more upside,” he said.
Nazri said the near term trend for the index favoured the bull camp, with resistance coming in at the 1,830 and 1,840 levels
while stronger shelf of support for any December dips stand at 1,820 and 1,800 levels.
He said seasonal trends usually favour a strong finish to the month of December with profit taking normally happen just before
the Chinese New Year in late January.
“With such big price gains on the books for last quarter of 2013, however, it appears that money managers are quietly
accumulating the local stocks possibly to post window dressing period in January 2014,” he said.
Bernard Ching of Alliance Research in strategy note Dec 3 wrote that Malaysian corporate earnings season continued to
disappoint as negative earnings surprises continued to outweigh positive earnings surprises in 3QCY13.
“That said, trend of earnings downgrade for the FBM KLCI component stocks may have run its course with net upgrade seen
following 3QCY13 results.
“With sustained investors’ sentiment going into 2014, we raise end-2014 FBM KLCI target from 1,840 to 1,940,” said Ching.
Meanwhile, M & A Securities research head Rosnani Rasul took a more cautious view and said with the ‘Obamacare’ still
hanging in balance, the approval for 2014 budget and debt ceiling increase in the US would not be an easy one.
“How long this would last is of anybody’s guess. It is because of this stumbling block that we think the Fed will not call the
shot on tapering in its coming meeting this December 17-18th.
“In any case, the Fed last meeting of the year in the next 2 weeks’ time will be an avenue to gauge when the deceleration in
quantitative easing will be done.
“Crystal clear timeline (if any) can be seen once the Fed meeting minutes are released, usually 2 weeks after the FOMC
meeting. Hence, the year-end window dressing could be a jittery one,” she said.