Bursa Malaysia’s uptrend is expected to continue this week as investors adopt a risk-on approach cheered by the Federal Reserve’s (Fed) move to keep its US$85 billion (RM268.6 billion) per month bond buying programme intact.
Affin Investment Bank Bhd VP/head of retail research Dr Nazri Khan said Asian equity markets including FTSE Bursa Malaysia KLCI (FBM KLCI) are poised to enjoy more risk-on rally to price in the latest Fed’s upside surprise.
He said the strong follow through buying amid runaway bullish undertone should inflate gains for FBM KLCI with the next target being the 1,826.22 all-time high achieved on May 6.
Its immediate resistance for the index stays at July 26 high of 1,811.65 with the next major support pegged at Sept 13 low of 1,764.13. The 30-stock FBM KLCI closed the week at 1,801 points.
Nazri said lower global bond yields, ultra-loose monetary policy and rising commodities prices should continue to support local equity market, adding that investors should take the current market bullishness to accumulate fundamentally strong stocks for another upside wave.
Aberdeen Asset Management Sdn Bhd Gerald Ambrose said the surge in equity is expected to continue next week as the indications are that the Fed bond buying programme is likely to last longer than expected.
He said it appears that the markets had overacted when the Fed announced its intention to scale down its bond buying programme.
MIDF Research Sdn Bhd research head Zulkifli Hamzah said with the FBM KLCI trading above 1,800 points, the focus would be on small- and mid-capitalised stocks.
He said the second- and third-liners have been active of late and believe that the retail players are no longer on the sidelines.
On some of the possible risks for the market, Nazri cited looming US budget battle and the Malaysian government austerity measures post general elections to have low impact on the local market.
He added that the upcoming Umno ruling party election and the tabling of a balanced Malaysian Budget 2014 should be a stronger catalyst for local sentiment.
On investors’ strategy, Nazri said investors should generally buy on dips on Budget 2014 and Umno-linked stocks such as Pos Malaysia Bhd, Gas Malaysia Bhd, UEM Sunrise Bhd, Malaysian Resources Corp Bhd, Gamuda Bhd and Ahmad Zaki Resources Bhd