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Sunday, September 5, 2010

Weekly Market Preview 06 September 2010

From the Chartroom
Malaysia’s bellwether FBM KLCI is on the roll, racing ahead to surpass our resistance targets sooner than forecasted. What next?

Up on all days except Friday, the key market barometer jumped 24.6-point or 1.7% during the week to finish at 1,435.67. Rising in tandem were the FBM 70 Index (+2.5%) and the FBM ACE Index (+0.8%). As big-caps garnered more interest, daily average activity increased to 928.5m shares (from 803.9m units) in volume and RM1.8b (RM1.4b previously) in value.

Foreign funds have been coming to Malaysia. According to Bursa Malaysia’s record published last week, they were net buyers of RM2.9b worth of Malaysia equities in Aug. This marks the third straight month of net buying by foreigners (+RM1.8b in Jun; +RM2.3b in Jul), although their level of trading participation was only marginally higher at 28.4% of value traded (versus 27.5% in Jul).

Aug is also the third month in a row when both local institutional and retail investors sold more shares than they bought, with net figures of –RM2.2b and –RM0.5b, respectively. In comparison, net selling by:
(a) local institutions stood at RM1.2b in Jun and RM1.6b in Jul; and
(b) local retail investors was RM0.5b in Jun and RM0.4b in Jul.

In terms of trading value breakdown for last month, local institutions accounted for 35.4%
(36.8% in Jun) while local retailers made up 21.0% (20.2% in Jun). Overall trading interest, nonetheless, may wane a bit in this coming holiday-shortened fortnight. Just one key economic report is on tap: the index of industrial production (IPI) for Jul due on Thursday (9 Sep).
Separately, the plantation statistics (on production, exports, inventory, etc) for Aug are scheduled for release next Wednesday (15 Sep).

As investors get into the holiday mood, our domestic stock exchange may take a rest too. Against a quieter backdrop, a consolidation pattern could be approaching. After all, the benchmark FBM KLCI – following an almost uninterrupted climb – has chalked up a cumulative gain of 86.3-point or 6.4% in a short space of 3½ weeks, now standing at just 5.8% below its all-time high of 1,524.69 (achieved in mid-Jan 08).

If an overdue market correction does set in, then we reckon the bellwether will likely find its first and second support lines at 1,415 and 1,395, respectively. Measured from the index high of 1,441.80 (reached last Thursday), this represents to a probable 2%-3% drop.

On the upside, the FBM KLCI remains on track to advance to higher highs since the market rally began in mid-Mar last year. The resistance targets to be overcome are seen at 1,435 (immediate) and 1,465 (next). The momentum could eventually carry the FBM KLCI – after hitting the mid-point range last week – further into our 2010 peak projection band of between 1,410 and 1,480.

Report from
HWANGDBS Vickers Research Sdn Bhd (128540 U)

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