REVIEW: The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) recorded its first weekly decline in more than a month as big stocks succumbed to heavy profit-taking towards the end of the week.
Banking, plantation and glove players bore the brunt of the recent sell-off, which was at its heaviest on Thursday, pushing the index down 16.67 points, or 1.1%, to 1,458.08.
Friday was another bad day for the local bourse, but some light bargain-hunting towards the end of the day’s session helped cap losses.
The index closed Friday down 6.89 points, or 0.5%, to 1,451.19. Week-on-week basis, the benchmark fell 15.78 points versus 1,466.97 points on Sept 17.
The FBM KLCI made a promising start to the week in review, reaching 1,475.99 points on Tuesday. It was the benchmark’s highest level since January 2008 when it hit an all-time high of 1,516.22 points.
The Government on Tuesday unveiled its ambitious economic transformation plan that will help the country achieve developed nation status by 2010.
The Economic Transformation Programme (ETP) – divided into 12 National Key Economic Activities – was well received by the market but, as usual, execution risk remained a major issue.
Elsewhere in the region, the mood on Friday was mixed with stock indices in Hong Kong, China, Singapore and Thailand posting modest gains.
In Japan, The Nikkei 225 Average tumbled almost 1%, but Indonesia’s Jakarta Composite Index rose 1.8% to close at another record high.
In the commodities market, crude oil hovered at around US$75 a barrel. Crude oil has been moving in a narrow range of between US$77 and US$73 since the beginning of the month.
The gold market, however, is red hot. The precious metal continued to record new highs almost daily for past few weeks. It was traded at US$1,295 an ounce during Asian trading hours yesterday. It has shot up 5.3% in the past month, rising on the back of the weak US dollar and demand for safe haven investment.
TECHNICALS: The index fell through its near-term support level of 1,465 points and briefly breached the 1,450 level in relatively quick succession over the past two trading days. The next floor is seen at 1,435 points.
CIMB Research advised investors to keep an eye on the 30-day simple moving-average line as it had never been violated since July. The recent decline means the 1,480-point level is the market’s near-term peak. That would make it the immediate resistence target before the index tests the record high of 1,516 points.
OUTLOOK: The FBM KLCI’s recent fall, as severe as it may seem, was what some investors had hoped for. The benchmark index, analysts says, has not had a “healthy correction” since May.
Earlier this week, CIMB Research upgraded its year-end target for the index to 1,500 points, but envisioned a pullback before the index heads higher.
HwangDBS Vickers on Friday viewed the market’s pullback an “intermittent process” as this week’s decline was on the back of a winning streak of 13 out of 16 weeks. A market correction could offer investors a chance to accumulate stocks at lower levels.
Brokers also opined that as big-cap stocks consolidate their recent gains, investors may shift their interest towards under-performing lower liners. This trend, they say, has been observed in previous market run-ups.
The week also saw Morgan Stanley upgrading its call for Malaysian equities to “overweight and to “advanced emerging market” status by the FTSE Group.
Such upgrades may help raise Bursa Malaysia’s profile and attract the inflow of fresh funds from overseas, particularly from the West where growth prospects are subdued versus this region.
Stock markets in the region, particularly those in Indonesia, the Philippines, Thailand and Malaysia, have outperformed others around the world with healthy double-digit gains so far this year.
The recent big gains mean stocks in the region are no longer cheap, but a growing economy and the lack of alternative investment elsewhere should keep investor sentiment here intact, at least for the time being.
On the local front, positive news flow stemming from the ETP, as well as from the upcoming Budget 2011, scheduled to be tabled in Parliament on Oct 15, may help allay lingering worries about faltering growth in the West.
While interest from overseas has been on the rise since July, retail participation in the local bourse is lacklustre. Offical data from the stock exchange show retail investors accounted for less than a quarter of the total daily trade.
By IZWAN IDRIS
izwan@thestar.com.my
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