KLCI week ahead No Santa rally, but KLCI to trend slightly higher

KLCI week ahead No Santa rally, but KLCI to trend slightly higher
Business & Markets 2013
Written by Surin Murugiah of theedgemalaysia.com  
Saturday, 21 December 2013 12:44

KUALA LUMPUR (Dec 21): The FBM KLCI is likely to trend higher next week, despite a holiday-shortened trading week.

With few catalysts to boost sentiment, investors are likely to nibble on select defensive blue chips that may help prop the benchmark index higher, although a Santa Claus rally is to be hardly expected.

The "Santa Claus rally" is a seasonal anomaly that describes a rise in stock prices in December, generally over the final week of trading prior to the New Year.

The penultimate trading week of 2013 will see the final initial public offering for the year with the listing of Kanger International Bhd on the Ace Market of Bursa Malaysia on Monday, which may likely be the only fresh lead for the local bourse next week, but with analysts’ skepticism over the stock, it may not be the catalyst required to fire up investor sentiments.

Having said that, window dressing activities and some bargain hunting may help push the local index higher before the year ends.

Affin IB vice president and head of retail research Dr Nazri Khan said that going forward, he expects Bursa Malaysia to price-in global relief from bullish Fed tapering announcement and gradually extend its rally higher.

“While we expect some quick short term profit-taking at 1850 resistance level (after 71 points or 3.99% the FBM KLCI gain over the last four weeks), eventually the local market will trend higher, pricing in reduced risk premium as some of the tapering uncertainty has finally been removed,” he said.

Nazri also expects more funds positioning ahead after the US Federal Reserve making a surprised announcement of a minimum scale back of its economic stimulus measures starting January 2014 (a mere US$10 billion tapering instead of the widely expected US$20 billion per month), taking the decision as a signal the world’s largest economy was returning to health.

He said that ironically, most traders now agreed that 'taper or no-taper' decision as a win-win-win for the Federal Reserve, economy and capital market alike.

“On the domestic front, we expect rising economic momentum to enter 2014 given the improved external situation, a series of government fiscal reforms, subsidy rationalisation, GST implementation and rescheduling of high import content projects to show positive results and improve Malaysia fundamentals,” he added.

Nazri said the fact that the second half of December is usually strong also provides a bullish tailwind for Bursa which should carry into the New Year.

He said that strategy-wise, traders should be more aggressive and perhaps should use any temporary volatility as opportunity to buy on dips.

He said aggressive bulls might consider buying FBM KLCI futures riding on trendline breaks above the week high of 1,851 using the week's low of 1,834 as a cut-loss-price.

“Stock-wise, traders should accumulate resource stocks namely oil gas and plantation stocks which do well as external front improve and commodity recovers.

“Our top ten featured stocks this week include SapuraKencana Petroleum, Dialog, Dayang, Yinson, Uzma, KL Kepong, Sarawak Oil Palm, Prestariang Berhad, PPB and TSH Resources,” he said.

Meanwhile, M & A Securities research head Rosnani Rasul said most fund managers would reduce their trading or even completely stop that for the year, paving the way for the index to be quite volatile due to reduce numbers of shares traded.

“At the current level, Nikkei 225 would be the world’s best performing index with 36% return followed by S&P 500 at 32%, DJIA at 27% and FBMKLCI at 9.3%.

“In any event, the year-end window dressing may keep the excitement alive in the equity market,” she said.