KUALA LUMPUR: The FBM KLCI is expected to trend moderately higher today in line with the positive close on Wall Street last Friday. The statement by Prime Minister Datuk Seri Najib Razak that the general election would not be held this year put an end to weeks of speculation, which was described by analysts as providing some clarity to a nervy local market.
US stocks rose, ending higher for the week after the Italian Senate’s approval of economic reforms gave investors some relief from worries about the eurozone’s debt crisis.
The Dow Jones Industrial Average was up 2.19% to 12,153.68, the Standard & Poor’s 500 Index rose 1.95% to 1,263.85 and the Nasdaq Composite Index added 2.04% to 2,678.75.
Affin Investment Bank Bhd head of retail research Dr Mohd Nazri Khan said Najib’s statement is to be taken as positive for the market as it provides for more clarity and less volatility.
“Sometimes an election can heighten market fluctuation as was seen in the run-up to the Sarawak election in April this year,” he said.
He said the FBM KLCI is likely to trend moderately higher towards the 1,500 level this week on more European economic optimism, adding that he sees positive market breadth with important local sectoral indices such as financials, trading services, technology and small caps making a firmer comeback.
“As long as the FBM KLCI stays above the 1,460 level, the short-term uptrend remains intact, favouring more upside to follow,” he said.
Nazri said given the strength seen in warrants and small-cap stocks, the local market is to be less concerned over the European debt crisis but more inclined towards the bullish local year-end festive mood all the way towards Chinese New Year.
While the threat of an economic slowdown is real, recent speculative plays and good market volume confirm that local sentiment will be resilient during volatile times, he said.
Traders should therefore use temporary weakness to ride the potential year-end rally, he said.
“As for the moment, we are pegging 1,500 and 1,530 as the major resistance while 1,460 and 1,430 as the major support for the local benchmark.
“As for the downside risk, we believe any new talk of radical overhaul and breakup of the European Union may unsettle investors and create a fresh wave of volatility in global financial markets,” he said.
On the strategy this week, Nazri recommended that traders accumulate high-yield and defensive small-cap stocks in the telco and utilities sectors (such as Yi Lai, Signature, NCB Holdings and Century Logistics) which may rebound further after a deep correction in the previous months.
MIDF Research head Zulkifli Hamzah said the local equity market is currently in a period of uneasy equilibrium, but added that foreign investors appear to be keeping faith in the Malaysian market and have been gradually accumulating since early October.
“There were net buyers again last week. Yet, local investors are circumspect of the fact that remains a large overhang of foreign liquidity in the system that can decide to eject overnight,” he said.
Among the stocks that could be in focus today are Dijaya Corp Bhd, Ivory Properties Group Bhd, Kimlun Corp Bhd, KPJ Healthcare Bhd and oil and gas-related counters.
Dijaya and Ivory inked a joint-venture agreement to develop mixed residential and commercial properties in Penang with a gross development value of RM10 billion.
The two companies said the development will be completed over the next eight years and will comprise residential, shopping mall, hotel, office suites, office towers, retail spaces and an open mall with a boulevard.
Construction of the first phase is scheduled to begin next year, they said last Friday.
Kimlun secured a contract worth RM68 million to build serviced apartments in Iskandar Malaysia in Johor. It said last week that its wholly-owned subsidiary Kimlun Sdn Bhd had accepted the letter of award for the contract from Grand Action Sdn Bhd.
KPJ is buying four plots of land in Klang, Selangor for RM23.76 million cash as part of its plans to build a specialist hospital.
It said last Friday the four plots are situated within a mixed development undertaken by Sazean known as “Sazean Business Park”, and that Sazean will make an application to convert the category of the land it is buying from agricultural to building/commercial.
Petroliam Nasional Bhd and Shell Malaysia last week signed heads of agreement for new enhanced oil recovery projects offshore Sabah and Sarawak, a development which may boost the oil and gas support services-related counters.
This article appeared in The Edge Financial Daily, November 14, 2011.
