Stock market expected to trade in tight range

Stock market expected to trade in tight range

Bursa Malaysia is expected to move in a tight range this week as the “earnings announcements” season will be in full swing and large capitalised companies announce full-year results.

“So far, the financial results announced have shown relatively weak figures,” Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew told The Malaysian Reserve last Friday.

Pong said the index started the past week on news that the US Federal Reserve (Fed) may stop or reverse the tapering process but the market pulled back towards the end of the week when a Fed representative said tapering process would still proceed.

Pong still likes the oil and gas sector where share prices of the companies in the sector are on a “bull” run. “It is still not the end of the run for companies in the sector,” said Pong.

According to Pong, the commodity prices namely crude palm oil is still on the upside, making it good for plantation companies. Pong opined the maximum upside for the FBM KLCI this week will be between 10 to 15 points higher.

Companies within the financial sector had only shown single- digit growth in earnings for 2013 and as more financial results come in from the sector, the index trajectory will depend on the results.

“Banking sector carries 30% weightage for the index,” said Pong, adding that aside the banks, a few big capitalised companies have yet to announced their results.

Affin Investment Bank Bhd head of retail research Dr Mohd Nazri Khan concurred that firmer market action is expected.

“The FBM KLCI should resume its upward path as bulls took heart from reduced prospects for a shift in Fed’s tapering bias, recovering US economy, rising commodity prices and the unexpected liquidity boost from the Bank of Japan”.

According to Nazri, resilient momentum with Standard & Poor’s 500 index, MSCI All World and Bursa Malaysia within 1%, 2% and 3% shy of their record high suggest there may be staying power behind the February rally despite the sell-off seen in January this year.

In addition, there are signs of global commodities making a comeback and this is likely to spill over to local resource stocks (oil and gas and plantation) and benefit the local market.

“From the technical front, the near-term bias has turned in favour of the bull camp with immediate support pegged near 1,800 and 1,780-point levels while resistance is spotted near 1,830 followed by 1,850-point levels,” said Nazri.

Finally, the upcoming Pengerang Economic Transformation Programme-Petroliam Nasional Bhd projects (worth RM60 billion) and the impending launch of 2014’s biggest mega initial public offering, namely the power business of 1MDB Bhd (raising RM10 billion), should be market positive.

— The Malaysian Reserve, 24 Feb 2014