KUALA LUMPUR (April 7): The FBM KLCI could experience some pullback in the week beginning April 9, as the rally over the past two weeks may not be sustainable given overriding external factors.
World stock markets look poised to fall early next week and safe-haven government debt prices could rally after U.S. employment figures fell short of expectations on Friday, according to Reuters.
U.S. stock futures fell more than 1% and Treasuries prices rallied after U.S. payrolls grew by 120,000 in March, far below the expected gain of 203,000 jobs, it said.
MIDF Research head of equity Syed Muhammed Kifni said that although the FBM KLCI recorded a fresh all-time high of 1,609.33 points last week, the joy was short-lived as the local market was not spared by the global market sell-off.
He said the pullback in global risk assets was triggered by the release of the minutes of recent US Fed meeting, which were interpreted by many as the central bank signaling its hesitation on launching a fresh round of monetary stimulus as the economy improves.
“Additionally, the poor Spanish government bond auction only added fuel to proverbial fire.
“We view the pullback as a clear manifestation that the recent market rally was underpinned mainly by liquidity, rather than valuations,” he said
Syed Muhammad said that nonetheless the streak of net foreign buying of Bursa-listed shares continued unbroken this past week.
Bursa data shows that foreign investors had been net buyers for 35 consecutive trading days until last Thursday, he said.
“We thus see no reason to not to expect a continuation of the streak this week. Hence the underlying market sentiment should remain healthy so long as the liquidity flow into the market remains positive and we are confident that the FBM KLCI will regain the 1,600s level perhaps towards the later part of this week.
“Moreover, our external trade as well as industrial production figures due for release this week might potentially be key market movers. The consensus expectations are pointing towards all-around sequential improvements in the numbers,” he said.
Syed Muhammed said the immediate resistance and support levels for FBM KLCI were pegged at 1,610 points and 1,590 points respectively.
Meanwhile, Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said the FBM KLCI was now ripe for a pullback towards a lower sideways range of 1580-1600 level.
“We reckon the equity optimism will take a mild negative turn following a surprised absence of USA stimulus and Spanish revived fiscal concerns with the bond yields climbing to their highest level in five month (Spanish 10-Year bond rose to 5.8%).
“This has stoked concerns regarding the European debt crisis, boosted safe-haven appeal of the USA dollar and weighed on local risk-taking sentiment,” he said.
Among the stocks that could be in focus are HARTALEGA HOLDINGS BHD [], INGRESS CORPORATION BHD [], EITA Reources Bhd, and oil gas-related counters.
Hartalega is setting up a RM1.5 billion“next generation integrated glove manufacturing complex” (NGC) comprising 70 new high tech production lines.
The company said last Friday that its wholly owned subsidiary Hartalega NGC Sdn Bhd that was incorporated on March 29 is the designated corporate vehicle for the setting up of the NGC project, that is mainly involved in the production of rubber gloves to cater to fast rising global demand.
Ingress Corp Bhd will establish a switching station for TENAGA NASIONAL BHD [] (Tenaga) in a deal worth RM26.6 million. The 275-kilovolt station will be set up at Pantai Remis, Selangor.
In a filing to Bursa Malaysia Securities last Friday, Ingress said Tenaga had issued a letter of intent for the project to a joint venture between two subsidiaries of Ingress, namely, Multi Discovery Sdn Bhd and Ramusa Engineering Sdn Bhd.
Elevator manufacturer and distributor of electrical and electronics equipment EITA Resources Bhd, will be listed on Monday on the Main Board of Bursa Malaysia.
The group’s IPO entails a public issue of 23 million new ordinary shares and an offer for sale of 17 million ordinary shares, at an IPO price of RM0.76 per share.
Of the 23 million new shares, 6.5 million were allocated for public balloting and 3.5 million shares for eligible directors, employees and business associates of the Group.
Oil and gas stocks could attract some investor interest after RHB Research Institute Sdn Bhd on April 6 said it has an Overweight rating on the oil and gas sector and said it was positive on the sector following Petroliam Nasional Bhd’s (Petronas) statement on April 5 that the proposed Refinery and Petrochemical Integrated Development (RAPID) project, to be located in Pengerang, Johor, was progressing as scheduled.
The research house said on Friday that the statement was the closest indication yet that the RAPID would proceed as planned.
