Market rally seen as unconvincing

Overall underlying tone of stock market said to be cautious

PETALING JAYA: There are no sufficient catalysts for the bulls to launch a convincing rally despite the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) having broken past the 1,600-point mark.

And with the penny stock fever pretty close to being over, investors and traders would do best to stay at the sidelines for the moment, said market traders.

“Despite renewing the record high for two straight days, the overall underlying tone of the market is somewhat cautious and this is clearly displayed on the scoreboard,” a technical analyst pointed out.

Still, from a technical point of view, the market remained bullish, he said, but the overbought condition of the short-term indicators might see the market undergoing a correction in the immediate term, pending a clearer picture.


On Monday, the FBM KLCI broke past the 1,600-mark, fuelled by blue-chip buying as liquidity from global markets continued to flow into growing economies like Malaysia
The 30-stock FBM KLCI gave up this week's earlier gains to finish down 0.5% or 7.36 points to 1,599.27 yesterday alongside its other Asian counterparts which also ended lower.

On Monday, the FBM KLCI broke past the 1,600-mark, fuelled by blue-chip buying as liquidity from global markets continued to flow into growing economies like Malaysia.

On Tuesday, it continued its uptrend to close at a record high of 1,606 points.

“Funds may have taken the excuse of the pull-back in overseas markets to book some profit, resulting in Bursa Malaysia slipping into the red yesterday,” one market trader observed.


In broader Bursa Malaysia, 235 counters were up, 501 were down while 346 were traded unchanged.

Trading volume was at 1.2 billion shares valued at RM1.1bil

According to the technical analyst, resistance is expected at the all-time peak of 1,606 points set on Tuesday.

Initial support is seen at the recent major breakout level of 1,597.08, of which a slip below this line would open the windows for more pullback to the 1,580 point-level.

In its recent market strategy report, JF Apex Research noted the recent rally experienced by Bursa Malaysia lacked heavy trading volume as opposed to previous market liquidity-driven rallies like in 2007 when trading volume surged to more than 4 billion shares per day.

“Thus, we doubt that the current market rally can shift into higher gear going forward,” it said in a report dated March 22.

The research house said then that it was not convinced that the current global economic condition was out of the woods and expected the local bourse to trade sideways with a negative bias or even a mild correction in the coming one to three months.

In its note to clients, Maybank Investment Bank Bhd said it was “neutral” on Malaysian equities, but “overweight” on the energy and construction sectors.

After an extremely dry year in terms of major work awards, we believe that 2012 “has to be the year”, the research house said.