KLCI week ahead KLCI to continue uptrend, despite possible hiccups at global markets

by **Cals** Mon 07 Apr 2014, 01:38

KLCI week ahead KLCI to continue uptrend, despite possible hiccups at global markets

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Saturday, 05 April 2014 12:04

KUALA LUMPUR (April 5): The FBM KLCI is expected to continue its uptrend next week, underpinned by more upswings of Wall Street, Europe and Asian regional indices.
However, momentum shares like Netflix and TripAdvisor in the US sold off sharply for a second straight day on Friday, giving the Nasdaq its worst day since February and leaving investors anxious about how much further they may fall, according to Reuters.
The big drop in momentum stocks overshadowed the day's relatively strong March jobs data, which helped the Dow and S&P 500 hit intraday record highs early in the session, it said.
Commenting on Bursa Malaysia, Affin IB vice president and head of retail research Dr Nazri Khan said that going forward, he expects the FBM KLCI to continue uptrend and track more upswings of Wall Street, Europe and Asian regional indices.
He said the local benchmark should rebound further driven by positive USA economic data, China mini stimulus, rebound in the emerging market stocks and successful KLCI break above 1,850 (after a good test of 200 day moving average near 1,800 level on March 17, 2014).
On the technical front, Nazri said that a solid white breakout candle with various momentum studies (MACD, RSI and Stochastics) continued to hook up from major support territories, suggesting a higher technical rebound.
He said immediate support now stood at the 1,850 and 1,820 levels while resistance loomed at the 1,860 and 1,880 levels respectively.
Despite Friday’s weakness, the market's close above the 20-day and 50-day moving average is an indication the short and medium term trend remains positive.
Nazri said the strong leadership in the offensive sectors (Industrial, Technology & Properties) and rotational plays on lower liners and small caps stocks (Aji, Deleum, KFima, Salcon, Matrix) should also bode well for local market risk appetite.
He said aggressive bulls might consider buying a modest setback in the index back to 1,850 level before bounce continue.
Nazri said a break below 1,850 would have a longer correction consequence while a second successful rebound above 1,850 may suggest a strong upleg, a double bottom pattern in the making.
“As for strategy, we reiterate our FBM KLCI target is 1980 by year end, implying 6.6% upside, 16x FY14 PER (Price Earnings ratio) or 14.9x FY15 PER, backed by earnings growth rates of 14.6% and 9.8% for FY14 and FY15, respectively.
“Meaning any weakness are excellent buy-on-dips opportunities. Coupled with an estimated FY14 dividend yield of 3.4%, the local equity market offers an exact 10% total return from here.
“Aggressive investors should follow technicals favouring momentum play by accumulating breakout stocks such as Public Bank, Astro, Dialog, IJM, CMSB, HapSeng Plantation, Takaful, Selangor Properties, Deleum and Chintek,” he said.