Sunday, December 12, 2010

Malaysian shares likely to trade firmer this week

Malaysian shares likely to trade firmer this week

KUALA LUMPUR: SHARES on Bursa Malaysia are likely to trade firmer this week with more inflow of funds despite the market's short-term weakness and concerns about China's monetary policy and the eurozone crisis.

The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) staying above 1,500 on good volume gave credibility on its resilience, Affin Investment Bank Head of Retail Research Dr Nazri Khan said.

Last week, the key market barometer rose by 6.3 points to 1,507.28 after rising near the historic high of 1,528.01 last Thursday on strong buying interest on key heavyweights but succumbing to profit taking a day later as investors opted to sell on strength.

Despite short term weakness on Friday and concern in China/Europe, we see positive investor risk attitudes in the local equity market, possibly driven by good corporate earnings and ample talks on consolidation exercise, Nazri said.

Other factors include impending election hype, stronger commodity price, attractive local bond yield and hot-money carry trade play.

The fact that Dow Jones at a new two-year high and Nikkei at a new seven-month high is likely also influence Asian indices, including FBM KLCI higher.

We also expect reduced equity volatility for the rest of this month to support FBM KLCI higher given the downtrend of the CBOE Volatility Index which suggests declining investor anxiety, Nazri said.

The looming January effect with year-end accumulation of selected blue chips in the last few weeks of the year is also supportive for the local market.

As the property and construction indices remain very close to three-year highs, there is expectation for more strength of the sectors to push FBM KLCI higher.

Going forward, we believe the local market is likely to show more resilience with a potential upside break-out next week. Given ample liquidity now, we are not surprised to see FBM KLCI aiming for 1,530 in the near term, Nazri said.

Any close above 1,530 would lead FBM KLCI to a good bull rally towards an all-time-high of 1,550 in the early part of next year, he added.

The market's weekly volume rose to 4.968 billion shares valued at RM8.94bil from 4.89 billion shares valued at RM9bil. Bernama

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