Jan rally expected, KLCI to stay above 1,500

PETALING JAYA: Boosted by the annual fund managers' ritual of window dressing, the FBM KLCI
is likely to end the year above the 1,500 level before springing into
more action in January for the expected Chinese New Year rally.
Fund
managers often resort to window dressing the selling of underperforming
stock and the buying of recently high-flying ones towards the end of
every quarter, particularly at the year-end, so as to present
better-looking investment portfolios.
At 5pm, the Composite Index
(CI) was up 2.58 points at 1,507 on volume of 1.56 billion shares.
Winners outperformed losers by almost two to one, with 492 counters up
and 254 counters down. There were 334 unchanged counters.
Most
analysts and dealers are calling a “trading buy” on the market, on the
back of the “January effect” and anticipation of the general election in
the first half of 2012.
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“A
lot of fund managers and institutional players are still on holiday.
That is probably why volumes are still thin, and trading has been a
little listless. The action should pick up next week when fund managers
come back to reallocate their portfolios for the new year,” said a fund
manager from a foreign house.
TA Securities senior technical
analyst Stephen Soo said that being a low beta market, the FBM KLCI had
been relatively resilient despite the external headwinds in the West.
“I
don't see much concerted efforts to push the index up. There could be
some minor upside, so perhaps the KLCI will range from 1,500 to 1,510,”
said Soo.
He also concurred that the CI would likely perform better in January, in line with the proverbial Chinese New Year rally.
With an election hanging in the air, the typical related stocks should see some price action.
OSK
Research head Chris Eng, who has a year-end target of 1,533 points,
said window-dressing activities had been happening throughout December.
“Well,
it's nice to see Malaysia being one of the best performers for 2011. It
also jives well for the upcoming election,” said Eng.
Eng has
been calling a “buy” on the market for the month of December ever since
both China and Thailand eased monetary conditions, and six central banks
across the globe came together to boost liquidity.
Eng will,
however, turn seller in January, especially if the market continues to
hover above the 1,500 level. He also feels that the European economic
woes will ultimately drag the market down.
Soo added that markets
tended to peak in January before pulling back. “Over the short term, I
will call a trading buy'. Closer to March, I will turn bearish” said
Soo.
On the external front, Soo feels that the eurozone concern has been temporarily addressed.
The fund manager said that Italy's Treasury bill auction on Wednesday indicated that the European Central Bank's (ECB) liquidity tap was finally starting to revive the eurozone's sovereign-debt markets.
Italy
sold 9 billion euros of six-month paper at a yield of 3.25%, compared
with 6.5% on Nov 25 when securities of a similar maturity were
auctioned. Demand outstripped supply in a ratio of 1.7 to one, compared
with 1.5 last month.
The results of the auction suggested the
offering by the ECB had made a big impact on the readiness of lenders to
buy sovereign debt. The sale of bills and bonds was the first big test
of market sentiment since the ECB provided eurozone lenders with a 489
billion-euro liquidity injection on Dec 21.
Italian banks reportedly took up more than 100 billion euros of the ECB's three-year loans.
With
the interest rate on these loans likely to be 1% or less, banks using
this funding to buy the Italian paper have managed to lock in a decent
spread.
For Bursa Malaysia,
2011 was definitely the year of mergers and acquisitions,
privatisations and takeovers. These corporate exercises brought life to
the market, particularly in the second half of the year.
In the spotlight now is the much-speculated general offer for national carmaker Proton Holdings Bhd by Khazanah Nasional Bhd.