FBM KLCI could pull back from the immediate support-turned-resistance level of 1,465

The benchmark FBM KLCI could pull back from the immediate support-turned-resistance level of 1,465 as investors may want to lighten their market exposure ahead of the holiday-shortened trading sessions next week. This comes as Wall Street was hit by renewed selling activity last night. Major U.S. equity indices fell between 1.5% and 1.9% amid mixed expectations whether the Federal Reserve chairman would be proposing any fresh policy measures to stimulate the weak U.S. economy at a meeting tonight.

On the corporate front, Berjaya Food shares may attract interest following its proposals to: (a) acquire a 50% stake in Berjaya Starbucks Coffee for RM72m cash; and (b) undertake a rights issue involving 4 rights shares with 4 free warrants for every 5 existing shares held at an issue price of RM0.65 each. Separately, Hong Leong Bank is due to announce its latest quarterly results possibly during lunch hours today.

FBM KLCI on our Malaysian bourse to move sideways

Even though Wall Street extended its gains last night – its key equity indices rose between 0.9% and 1.3% on better economic data – we suspect Asian investors would be keeping an eye on the U.S. stock futures performance for market direction today.

This morning, the Dow Jones Industrial Average Sep futures contract lost ground (partly due to news that the CEO of Apple has resigned) to hover at a 73-point discount to the spot rate. We expect the benchmark FBM KLCI on our Malaysian bourse to move sideways with a marginal positive bias ahead after declining by 13.2-point yesterday.

In terms of corporate developments, among the listed companies that reported below expectations financial results last evening were Kinsteel, Kossan Rubber and LM Cement. More earnings announcements are due to be made later today, including from Maxis (during lunch hours), Sime Darby and Genting/Genting Malaysia. Separately, EPIC could be in the limelight after getting an unconditional takeover offer to buy its shares at RM3.10 each, which will also involve a cash compensation scheme to the shareholders who have sold their EPIC shares between 10 Dec 2010 and 23 Aug 2011.

Wall Street jumped last night

Wall Street jumped last night. Key U.S. equity indices rose between 3.0% and 4.3% chiefly on the expectations that the Federal Reserve chairman could be announcing fresh policy responses to stimulate the struggling U.S. economy at a gathering of central bankers later this week.

This may provide a temporary boost to investment sentiment around the region today. On the chart, the benchmark FBM KLCI will probably climb towards its technical resistance level of 1,495 ahead. Meanwhile, among the slew of corporate financial result announcements out yesterday evening, banking heavyweight CIMB’s report card came in within expectations (which may lead to a rebound in its share price after dropping 4.4% in three days) while Axiata and MAS posted disappointing earnings.

FBM KLCI may swing sideways with a downward bias ahead

After rising as much as 1.9%-2.4% initially, major U.S. equity indices lost steam subsequently to finish between flat and marginally up (0.3%) last night. This pedestrian Wall Street performance would likely prompt Asian investors to be cautious today.

Sentiment on our Malaysian bourse could be affected too. The benchmark FBM KLCI may swing sideways with a downward bias ahead. Immediate support level is seen at 1,465. Against the sluggish broad market backdrop, investors are expected to react to individual corporate developments such as:

1. Sunway as its shares will be re-quoted today following the merger exercise between Sunway Holdings and Sunway City;
2. KNM, after reporting below consensus earnings in 2Q11; and
3. Axiata, which is due to announce its latest quarterly results during lunch time.

Meanwhile, more financial announcements – from the likes of CIMB, MAS, AirAsia and Parkson – are scheduled to be made after market hours today.

Selling pressures across Asia when trading resumes this week

Brace for more selling pressures across Asia when trading resumes this week. Essentially, the bears would remain in control following an extended drop on Wall Street last Friday. Key U.S. equity indices fell between 1.5% and 1.6% at the closing bell as investors sold equities in response to deteriorating economic prospects.

Back home, the benchmark FBM KLCI will likely start the week on a weaker footing, possible sliding towards the immediate support level of 1,465 ahead. Among the index heavyweights that could drag down the broad market today include Tenaga (after it issued a profit warning arising from additional high fuel costs) and Maybank (which is due to release its latest quarterly results during lunch hours today).

Report from HWangDBS