KLCI week ahead KLCI to trend upward cautiously, geopolitical tensions weigh

by **Cals** Sat 26 Apr 2014, 18:28

KLCI week ahead KLCI to trend upward cautiously, geopolitical tensions weigh

Business & Markets 2014

Written by Surin Murugiah of theedgemalaysia.com

Saturday, 26 April 2014 11:47

KUALA LUMPUR (April 26): The FBM KLCI is expected to trend upward cautiously next week against the spectre of ongoing geopolitical tensions involving Ukraine and Russia, with Russia threatening to flex its military muscle, keeping global equity markets on tenterhooks.
Elsewhere, U.S. and world stock indexes fell on Friday as tensions between Ukraine and Russia weighed heavily on global equity markets and the rouble, while yields on the 30-year U.S. Treasury bond reached the lowest in nearly a year, according to Reuters.
Affin IB vice president and head of retail research Dr Nazri Khan said that going forward he expects firmer market action after the local stock market advanced for the third straight month on relatively good volume (gaining a total of 96 points or 5.4% since 4th February 2014).
He said the FBM KLCI should resume its upward path as bulls took heart from reduced Ukraine tension, reduced prospects for a shift in Fed's tapering bias, recovering USA economy (positive report on USA retail sales which are the largest gain in 18 month), rising commodity prices and more liquidity boost from the Bank of China and European Central Bank.
Nazri said the surprise dovishness in China and Europe may suggest more monetary easing to later this year, benefitting the regional market including Bursa.
Global equity markets should see more bullish session helped by follow through buying after a strong Wall Street session, positive US corporate earnings results and merger activity (USA healthcare/pharmaceuticals), he said.
Nazri said that on the technical front, despite Friday weakness, the FBM KLCI has scored its sixth successive daily rise, the longest run of daily gains since 1st March 2014.
He said that left the equity benchmark just 1.1% below its record closing high.
Nazri said there were are also signs of global commodity making a comeback with crude palm oil, light crude oil and gold enjoying the biggest weekly gain in seven week as traders scrambled to cover short positions with most commodities drawing support from a weak USA dollar.
He said given the bullish commodity seasonalities of March-June and the FBM KLCI registering the third consecutive up month, we see higher probabilities for deeper upside, following a strong momentum by the local market over the past year (the FBM KLCI has gained 10.6% since January 2013, 42.3% since September 2011 and 132.1% since October 2008).
“As for strategy, traders should look towards the start of a new upleg and aggressively position for momentum market leaders namely construction (ETP Play), properties (ETP Play) and technology stocks (USA Recovery Play) which includes our Top Ten Picks i.e. Matrix, Ecoworld, MKLand, Bertam, IJM, Muhibah, Mitra, Willow, Gtronic and Granflo.
“Aggressive traders might also consider capitalizing on upside volatility by purchasing global index futures or accumulating medium term USA index call options,” he said.