Monday, 2 January 2012

Bursa expected to kick off new year on upbeat note

There is still a lot of liquidity sitting on the sidelines and that will be supportive for the market as long as sentiment remains confident, says HwangDBS.

WITH a spiralling debt crisis in Europe, political upheavals around the world, and crumbling creditworthiness in major industrial countries, it was tough to know where to invest in 2011.

The year 2012 too is unlikely to offer much respite.

However, despite these turmoils, Bursa Malaysia is expected to kick off the new year on an upbeat note.

The market will be relatively firm as there is ample liquidity in the system and the financial system remains strong, aided by positive trade figures.

HwangDBS said the market will continue to be challenging and it is tough to make a judgment call at this juncture.

However, there is no quick fix or immediate resolution to these issues as the problems plaguing developed economies are deep-rooted fundamental issues such as mounting debt, low growth and high unemployment.

"Not all is doom and gloom. The potential remains in the emerging markets where the structural growth story remains intact, supported by strong fundamentals: rising middle- class income, young population, stronger government reserves and healthier corporate balance sheet," it said.

Inflation in the region is no longer a threat and is seen to be easing.

Although it is going to be a slow start, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) has the chance to reach a new high by mid-2012.

"There is still a lot of liquidity sitting on the sidelines. That will be supportive for the market as long as sentiment remains confident," HwangDBS said.

The key index may hit 1,600 points, climbing 100 points, or between 6.0 and 7.0 per cent, in the first half of next year. It was at its all-time high of 1,594.74 on July 8.

Positive news flows due to talk of the 13th general election and the rolling out of the Economic Transformation Programme are among the favourable factors that can jolt some excitement into the market.

Among stocks that could attract interest are oil and gas, consumer and plantation. Plantation stocks are likely to see positive buying in the next one to two months.

"We believe there is money to be made regardless of market conditions. It is a matter of where and at what risk level," said HwangDBS.

Bursa Malaysia ended a volatile 2011 on a strong note as window- dressing activity became the catalyst for the last-minute push, with the key index at its best in nine months.

The FBM KLCI closed the week 34.58 points higher at 1,530.73.

Weekly volume dropped to 5.18 billion shares, worth RM4.34 billion, from 7.05 billion shares, worth RM4.996 billion, transacted last week. Main Market turnover declined to 2.89 billion units, valued at RM3.93 billion.

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