KUCHING: The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) is expected to climb this week as a result of renewed market confidence stemming from positive statements made recently by the US Federal Reserve.
Nonetheless the index’s rise will not be without challenges with psychological resistance at the coveted 1,800 point mark, according to the research arm of Kenanga Investment Bank Bhd (Kenanga Research).
“The benchmark index managed to edge up by 0.75 per cent week-on-week last week,” the research team observed in the latest report from its ‘On Our Portfolio’ series.
“Our portfolios, however, had a mixed performance against the key index but continued to outperform the market by 339 to 1531 basis points (bps) on a year to date basis.
“There is no change in our investment strategy where we continue to recommend investor to adopt ‘Buy on Weakness’ strategy when the index is below 1,720 and ‘Sell on Strength’ when the index trade above the 1,810 level,” it revealed.
It noted that the FBM KLCI started with a consolidation mode before cheering the positive statements made mid-week by US Federal Reserve chairman Ben S Bernanke.
The Fed head called for maintaining the current monetary policies despite some divisions between Fed officials over the timing to scale back bond purchases as revealed in the June meeting minutes.
At the end of last Friday’s session, the local index rose by 13.38 points or 0.75 per cent to settle at 1,785.65 in which leading movers were Tenaga Nasional Bhd (where share price advanced by 4.2 per cent); Axiata Group Bhd (up 2.4 per cent) and IOI Corporation Bhs (up 2.7 per cent).
“Moving forward, we believe the market could potentially trend higher this week judging from the better market sentiment,” Kenanga Research opined in the report yesterday.
“Technically speaking, the FBM KLCI broke out of the crucial 1,775 resistance level last Thursday while the key indicators have shown some improvement.
“Hence, the technical picture favours the upside, at least in the short-term. The index immediate resistance levels are now set at 1,788 followed by 1,800 while the key buying support should appear at between 1,770 and 1,775.”
It added that key economic data and corporate events to watch for this week included US June’s retail sales less autos (on July 15) and consumer price index year-on-year (y-o-y) change (July 16),
where the market’s expectations are at 0.4 and 1.6 per cent respectively.
In addition, there would be China’s second quarter (2Q) gross domestic product growth (July 15), where consensus expectation is at 7.5 per cent and Malaysia’s June consumer price index (CPI) y-o-y change (July 17) in which the consensus was expecting the country’s June CPI to record at 1.9 per cent y-o-y change.
On a year to date basis, all of Kenanga Research’s investment portfolios continued to outperform the market by 339 to 1531 bps, with the top performer being the ‘Thematic’ portfolio, which recorded 22.8 per cent total returns consisting of capital gains and dividend received.
This was followed by the ‘Growth’ (up 19.8 per cent) and ‘Dividend Yield’ (up 10.9 per cent) portfolios in contrast to the FBM KLCI’s growth of 7.5 per cent during the same period.
“We believe that the right stock selections, appropriate stock weighting and the right timing in buying and selling stocks, were the key success factors in beating the benchmark index in the total return basis,” the research team opined.