KUALA LUMPUR (May 31): The FBM KLCI is likely to perk up next week and test the 1,890 to 1,900 resistance levels, riding on improving global investor sentiment.

The Dow and the S&P 500 edged up to end at record highs on Friday, wrapping up four straight months of gains, after mixed economic data gave investors little reason to rush into stocks, according to Reuters.

After the benchmark S&P 500’s latest record closing high – its fourth in the last five sessions – gains may be harder to come by until the market’s direction becomes more clear. Payrolls data and a European Central Bank meeting will be the major catalysts next week, it said.

Affin IB vice president and head of retail research Dr Nazri Khan said that going forward he expects the local market to perk up, benefitting from the prospect of continued support from the world’s central banks (Federal Reserve, European Central Bank and Bank of Japan) and positive global sentiment.

He said this was in tandem with global stocks which forged into new uncharted territory (MSCI All World & FTSE All World at a record six year high, up 3.2% & 3.5% w-o-w) driven by liquidity expectation and falling major government bond yields (10 Y USA Treasury Note & Germany Bund yield at 6 month low).

Nazri, who is also the president of the Malaysian Association of Technical Analysts, said the optimism was reflected by most European stocks which includes the FTSE Eurofirst 300 and London FTSE rising to a six-year closing peak.

He said an active global economic calendar should extend global upside momentum and was likely to focus on macro-economic data, corporate deal activity and month-end portfolio adjustments.

Nazri said Asian equity markets including the FBM KLCI should make a strong upside follow through in the wake of Wall Street record highs with the Japanese Nikkei eking out the strongest single day gain in a year and China’s Shanghai Composite posting a new two-week high.

Last week, the KLCI slid after hitting the all-time high of 1889.47 but manage to rebound back near 1,860 support level, with positive weekly breadth as gainers edged losers 5 to 3 on less active trade totaling 1.5 billion shares worth RM1.9 billion.

“Despite several false starts, the local index should ultimately take on a bullish track ahead of the Wall Street opening, and climbed into a new high territory again,” he said.

Nazri said while local small cap stocks consolidated with cautious sentiment, impressive rotational interest on local blue chips should showcased healthy risk taking with active retail participation accumulating event play blue chips warrant such as Telekom, Digi, Astro, IJM Plantation, Maybank and Public Bank warrants.

He said the major local driver should be from upside leadership seen in the local plantation and trading service shares, which traded at their highest level in the history 9,406.75 and 243.74 levels respectively. 

“We expect the benchmark index to rebound with high liners (Plantation, Technology, Trading Service) to charge bigger funds inflow.

“The next area of resistance is pegged around 1,890 and 1,900, while major support hits today at 1,860 and below there at 1,850,” he said.

Nazri said that stock-wise, traders should accumulate world cup linked blue chip stocks which do well as event approach.

“Our top ten featured stocks this week include Telekom, Axiata, Digi, Astro, Dutch Lady, Globetronics, MPI, Hap Seng, IJM Plantations & Kim Loong.

“Last but not least, aggressive bulls should continue buying the FBM KLCI futures riding on trendline breaks above 1,880 while using 1,850 as a cut-loss-price,” he said.

Business & Markets

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