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M'sian market poised to test new high

Publication Date : 05-05-2014


Despite the stock market adage: sell in May and go away, technical analysis indicate that Malaysia’s stock market is likely to test a record high this week.

According to technical analysts, near-term indicators suggest that the benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) will likely rewrite its all-time high of 1,882 that was recorded on Dec 31, 2013.

Hong Leong Investment Bank (HLIB) in a note last Friday, stated the near-term outlook for the FBM KLCI to reach its all-time high was positive following a strong breakout above the estimated 10-day simple moving average of 1,861.

“Another decisive breakout above the downtrend will further support the uptrend towards the 1,890 to 1,900 zones,” HLIB said in its report.

SJ Securities concurred, saying that recent technical indicators showed the FBM KLCI is staging a bullish reversal, with the key index likely to move higher on follow-through buying momentum.

“With the strong upward move last Wednesday, the trend of the FBM KLCI has again turned up as the key index is now staying above the short, medium and long-term moving averages.

“A breakout from the all-time high level will see the FBM KLCI moving higher to the next target of 1,900 in the short to medium term,” SJ Securities explained.

Supported by government fund buying, the FBM KLCI rose 12.18 points last Wednesday to close at 1,871.

A broker said that despite the sell-down of small capitalised stocks last week, investor sentiment was positive on the belief that a sustained global recovery would benefit the domestic economy and companies.

“What’s more, there is still ample liquidity out there to drive the market,” he said, adding that he believed the stock market would likely be driven mainly by local funds.

Supported by government fund buying, the FBM KLCI rose 12.18 points last Wednesday to close at 1,871.

On Friday, the index was down 2.44 points to close at 1,869.08, dragged by weak performances of selected blue chips such as Public Bank Bhd, CIMB Group Holdings Bhd and PPB Group Bhd.

“The market is still very ‘strong’ despite the slight dip last Friday, we believe it has already entered a bullish phase,” a technical analyst said. “The bullish trend is sustainable over the short and long run, barring any economic shocks,” he explained.

Maybank Investment Bank chief chartist Lee Cheng Hooi, however, is less optimistic.

“The futures have been dealing at a huge discount to the equity market. It is a very tricky situation,” Lee said.

The FBM KLCI May Futures is currently trading at around seven-point discount against the FBM KLCI. Lee had recommended a “nibble on dips” stance for the key index.

He noted: “We expect heavy selling to emerge near the resistances of 1,873 to 1,882. The narrow range towards the index’s all-time high would suggest heavy selling around those stipulated resistance levels.”


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