KUALA LUMPUR: Chances of a pre-Chinese New Year (CNY) rally in the stock market are slim with more selling expected later this week and even next week, analysts and fund managers say.
However, while the key 30-stock FBM KLCI index may falter, small stocks may continue to garner interest.
The first day of the CNY falls next Monday, which will be a shorter trading week with many in the investment community on holidays.
"As domestic news flows are expected to be thin ahead of the upcoming CNY holidays, the focus will shift to the US and Europe in the next fortnight," said HwangDBS Vickers Research in a note to clients yesterday.
And it's not a pretty picture in these two markets, particularly in Europe.
Standard & Poor's (S&P) downgraded more than half of the eurozone's 17 members over the weekend, including France, sending all key Asian markets into the red yesterday over fresh concerns about Europe's debt problems.
"Following the downgrades by S&P on the sovereign-credit ratings of nine countries, it remains to be seen if there will be any impact on the ability of the region's bailout fund to raise money via borrowings," HwangDBS said.
At home, the FBM KLCI shed about 14 points, or 0.9 per cent, to close at 1,509.06, its lowest since January 4. There were 542 losers, 207 gainers and 289 counters unchanged.
Analysts expect the local index to move rangebound from here as it moves to enter the Year of the Dragon.
Holding above 1,500 points is probably the best the market can do for now, said Choo Swee Kee, executive director at fund management firm TA Investment Management Bhd. He noted that the market has already ridden on a minor uptrend since mid-December.
"There's a good chance it will hold at this level, but will fluctuate in line with global movements," he told Business Times.
Still, small stocks are expected to remain in focus.
"While the benchmark index may be seeing little short-term action, the mythical creature may breathe fire into the second and third liners, with rotational plays continuing to attract speculative buying interest for the time being," HwangDBS noted.
Lee Cheng Hooi, head of retail research at Maybank Investment bank, advised investors to trade with a short-term view.
"Trade cautiously with a short-term time frame, in view of potentially impending negative news on Europe. Locally, we expect a quiet market ahead of the CNY holidays this weekend though," he told clients in a note yesterday. By Adeline Paul Raj, btimes.com.my
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