KL stock mart to take cue from US

The Malaysian market has just entered into a new round of volatility, says a research head at a local brokerage


STOCKS are expected to be traded lower this week as the lack of good news on the outlook of the developed markets' economies has driven investors into a defensive mindset.

"There were enough bad news about latest US economic data and European banks last week that has somewhat pushed investors into a defensive mindset. The market volatility is still strong. In fact, I think we have just entered into a new round of volatility," said a research head at a local brokerage.

Bursa Malaysia's performance today may take cue from the poor finish by the US stock market on Friday, which saw the Dow Jones Industrial Average fall by 172 points. The decline was just enough to erase all the gains accumulated for the week.

Last Thursday, European Central Bank (ECB) said that one unidentified bank had borrowed US$500 million (RM1.5 billion) a day for seven days through its dollar lending programme at a near-desperation rate of 1.1 percent. A request for dollars from ECB suggests rising tensions on interbank lending markets.

Meanwhile, in the US, there was a flow of bad news that spooked investors. It was revealed that 408,000 people applied for unemployment benefits last week, the most in four weeks. Inflation at the consumer level rose 0.5 per cent in July, the highest since March.

The National Association of Realtors said that the number of people who bought previously-occupied homes dropped in July, the third time in four months.

Also, manufacturing has sharply weakened in the Philadelphia region, according to a report from the US Federal Reserve. The manufacturing industry, which has been one of the US' strongest industries since the recession ended in 2009, is seeing a slowdown in growth this year.

"With all the uncertainties, it is quite hard to gauge where the bottom level is," added an analyst.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index last week rose marginally to 1,483.98 from 1,483.67 recorded previously. During last week, the benchmark index rose to as high as 1,503.30.

Analysts expect the support and resistance levels of the market to be at about 1,460 and 1,500 respectively.

Among stocks that would be in focus this week include: Berjaya Land Bhd, which has proposed to buy a parcel of land from Penang Turf Club; Hock Seng Lee Bhd, which has won a RM45 million job to build rural water supply in Sibu; as well as Axiata Group Bhd, which will announce its second-quarter financial results tomorrow.