KLCI week ahead KLCI expected to regain its upside momentum

by **Cals** Mon 17 Feb 2014, 07:49

KLCI week ahead KLCI expected to regain its upside momentum

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Saturday, 15 February 2014 10:55

KUALA LUMPUR (Feb 15): The FBM KLCI expected to regain its upside momentum next week and rise in tandem with the gains at Wall Street and global markets last Friday.
World stocks climbed for an eighth straight session on Friday on signs of a gradual improvement in euro zone growth, and the euro rose to its highest level in almost three weeks, while gold rose above $1,300 an ounce, according to Reuters.
Wall Street stocks posted gains for a second straight week, despite more weak data on the U.S. economy. Investors again appeared to blame the data on bad weather. The Nasdaq rose for a seventh session in a row, closing at its highest level since 2000, it said.
Affin Investment Bank vice president and head of retail research Dr Nazri Khan said that going forward the FBM KLCI should regain upside momentum and track more upswings of Wall Street on dovish Federal Reserve testimony and positive global economic data despite having the latest bout of Italian political turmoil.
Nazri said local equities should rise further taking clues from recovering global market as Janet Yellen, the new chairwoman of the Federal Reserve maintain policy continuity and sprang no surprises in her debut testimony to Congress.
He said the market obviously took this as a signal that the latest currency volatility did not pose substantial risk, the USA economy continued to be healthy and the Fed would continue to taper its monthly asset purchases by a mild US$10 billion at each of its Open Market Committee meetings.
Also helping overall market sentiment was news that Washington will not face another bout of debt ceiling brinkmanship for the time being as it is postponed to November congress mid-term election, said Nazri.
Further, he said investors should welcome positive evidence from China suggesting global demand is stronger than previously thought, adding that he expects positive China economic data (better than expected Trade Balance & Inflation data) and perceived Janet Yellen dovishness to lift equity and commodity prices near term.
“On the fundamental front, local market should ultimately price-in higher than expected GDP growth of 5.1% in 4Q2013.
“That underlies the constant upwards straight-line of Malaysia’s economic growth,” he said.
Nazri said that after dipping unexpectedly to 4.1% in 1Q of 2013, the economy had since bounced back to 4.4% in 2Q, 5.0% in 3Q and 5.1% in 4Q.
Nazri said the local index had reversed its January decline to close 2.4% higher (week-on-week), only about 3% down from a record high struck at 1882 level even as ringgit fell sharply to 3.345 last week.
“While local blue chips consolidate with buoying sentiment, impressive small cap leadership and rotational interest on penny stocks showcase healthy risk taking with active retail participation accumulating stocks like Iris, KNM, Sona, Cuscapi, Willow and TH Heavy Engineering,” he said.
Nazri said that on the technical front, the FBM KLCI showed an impressive week on week price rebound due to a short-term oversold condition and stronger external front.
He said that the FBM KLCI had perfectly retraced 50% (of the gains August-Dec 2013), rectifying its oversold condition and beautifully maintains its upchannelline going back to September 2011.
Immediate resistance for the index remains at 1,830 and 1,850 levels while immediate support now stands at 1,800 (psychological) and 1,780 (200 moving average) levels respectively, he said.
“We reiterate that the KLCI remains above its monthly uptrendline and thus is in a secular bull market.
“That means any significant periods of weakness this year should be viewed as strong buying opportunities.
“For quick play, we showcase ten featured stocks UMW Oil Gas, Dayang, Uzma, DSonic, CBIP, Tambun, Yinson, Perdana Petroleum, KNM and Iris Corp,” said Nazri.
He concluded that aggressive traders might also consider capitalising on temporary volatility by purchasing index and futures or options.