Posted on February 24, 2013, Sunday
KUALA LUMPUR: Share prices on Bursa Malaysia are expected to trend lower next week primarily due to regional weakness from a bout of profit-taking on uncertainty surrounding the US Federal Reserve policy.
Affin Investment Bank Bhd vice president and head of Retail Research Dr Nazri Khan said the Fed’s January meeting minutes would disrupt the impressive early 2013 bull rally in global equity markets in the near term.
“Overall, we expect the local stock market to stay weak next week with key sectors (finance and services) leading the index lower (especially after the uninspiring debut of Tune Insurance),” he told Bernama.
Nazri said China’s Shanghai Composite heavy decline on prospects of further tightening in property market as well as weaker than expected global economic data might contribute to more sell off next week.
He said selling would be also exacerbated by weaker-than-expected commodities (light crude oil and gold tumbled to two month and seven month low respectively) due to strength in the US dollar.
“Due to prospects that the Fed could pull away from quantitative easing sooner than expected, there is growing concern over the March 1 budget agreement in the US,” he said.
The odds were high that the budget deal would not be strucked by March 1 deadline (between Republicans and Democrats) to head off the start of US$85 billion in government spending cuts, Nazri said.
He said in addition to the abrupt shift in economic sentiment, technical momentum indicators had turned lower into negative territory in favour of more downside ahead.
“Aggressive profit-taking action at 1,630 level (FBM KLCI) and a long black weekly candlestick reversal has put the bears in control,” he added.
Nazri said sectorial rotation of funds also provided clues on the mood of the market.
For the week just ended, sector rotation suggested a more defensive sentiment with funds rotating out from the leaders (finance, trading service and consumers) to laggards (properties and construction).
“The sector trend suggests investors are still nervous about a downside correction with market play restricted to bargain-hunting (of battered down stocks) and profit taking (of recent market stars).
Further, lack of follow-through after testing 1,600 psychological level (limited bounce, low volume, negative breadth) with the FBM KLCI failing to reach its weekly high of 1,630 level may suggest a pullback (instead of rally) in the offing, he said.
The week started with a softer note, continuing a bearish market sentiment from the previous week. This continued until Wednesday with a rebound on Thursday, amid the string of strong corporate earnings as well as better than expected economic data.
The market ended on positive territory following strong buying support in key counters like Malayan Banking Bhd and Axiata Group Bhd, which posted strong corporate earnings during the week.
The local bourse also responded positively towards the country’s strong fourth quarter gross domestic product growth which stood at 6.4 per cent.
Tune Ins Holdings Bhd, which made its debut on the Main Market on Wednesday, started promisingly with a three sen premium on its offer price of RM1.35.
However, it ended the week flat at its offer price with 3.759 million shares traded.
On corporate news, Affin Investment Bank viewed the launching of the RM30 billion Singapore-Kuala Lumpur high speed train project as the best immediate catalyst to cushion market downside.
“We expect the project to be a direct boost to properties and construction sector (and indirectly to gaming and hospitality sector due to more tourist arrivals) with stocks like UEM Land Holdings Bhd, Malaysian Resources Corporation Bhd, IJM Land Bhd, SP Setia Bhd, EO Bhd, Sunway Bhd, Shangri-La Hotels Malaysia Bhd and Genting Bhd to be major beneficiaries,” Nazri said. — Bernama
Share prices to trend lower next week amid global, regional weaknesses
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