Powered by Blogger.
Sunday, April 24, 2011

Weekly Market Report (25 APR 2011)

While immediate downside risk appears fairly limited, our Malaysian bourse could be stuck inside a sideways trading pattern unless buying interest picks up soon. To foresee any sustainable market revival, the FBM KLCI must overcome 1,530 convincingly first.

The benchmark index rebounded initially (to a high of 1,535.09 on Thursday) but lost momentum subsequently in the week. It then settled at 1,522.75, near where it was (at 1,521.94) two Fridays ago. Larger gains were, nevertheless, posted by the FBM 70 Index (up 0.3%) and the FBM ACE Index (+4.8%) through the week. Meanwhile, lower liners saw active trading as daily volume averaged 1.2b shares valued at RM1.5b, versus the 1.1b units worth RM1.7b traded the previous week.

Overseas developments will be closely watched this week. Following Standard & Poor’s cut in the U.S. longterm credit outlook to negative last Monday, investors may get an update on the country’s financial standing when the Federal Open Market Committee meets on Tuesday and Wednesday. While the policymakers will likely keep the federal funds rate unchanged, the focus will be on:
  1. possible timing hints on future interest rate hikes amid heightened inflationary pressures;
  2. whether the US$600b quantitative easing program will end in Jun as scheduled, which can shift global fund flows trend and currency markets outlook.
(Note: The US$ has been falling lately. For example, vis-à-vis the Malaysian Ringgit, it hit RM3.0054 per US$ on Friday, a fresh high since the fixed exchange rate regime was lifted in Jul 05).

This comes as foreign interest on Malaysia equities remains slow so far. According to the stock exchange, trading participation from foreign investors stood at 24% in 1Q11, down from 27% in 2010 (though in absolute term daily average trading value by foreigners actually rose to RM519m from RM393m last year). On the other hand, retail investors were more active in 1Q11 with trading participation inching up to 27% (from 26% in 2010) and their daily average trading value climbing to RM583m (from RM378m in 2010). The latest statistics published last week also revealed that foreign ownership as a percentage of overall market capitalization had dipped slightly from 21.9% at the end of last year to 21.4% end-Mar this year.

Providing a balance to the external news flows will be several individual events on the local scene. They include:
  1. the high-profile official visit by the Prime Minister of China scheduled on Wednesday through Saturday, which may see the signing of agreements with Malaysian companies in the key economic areas such as oil & gas, education and infrastructure; and
  2. a court ruling (due on Thursday) on the takeover saga of EON Capital’s entire assets and liabilities by Hong Leong Bank.

Technically speaking, the FBM KLCI may just range-bound with a slight upward bias in the short run. A subsequent breakout from the congestion pattern could be forthcoming either by: (a) pulling away from its immediate resistance threshold of 1,530, thus propelling the benchmark index further towards the next resistance target of 1,550; or
(b) a cut below its 39-day moving average line (which is standing now at 1,522) will signal further downside ahead. This may then send the bellwether to test the first two support levels of 1,495 and 1,465, respectively.
Yet, judging from the underlying resilience of late, we are keeping our hopes that a positive momentum will prevail, and pave the way for us to see an eventual market recovery anytime soon.

0 comments:

Related Posts Plugin for WordPress, Blogger...

BlogMalaysia.com

About This Blog

  © Free Blogger Templates 'Greenery' by Ourblogtemplates.com 2008

Back to TOP