Profit-Taking Breather Pending Budget 2014

Buy on Weakness MRCB & Wah Seong

 

Blue chips extended gains Thursday, lifting the FBMKLCI to close at another record high on hopes  the  contents  of  Budget  2014  could  present  goodies  to  boost  economic  growth.  The index  added  4.82  points  to  settle  at  1,818.93,  off  an  early  low  of  1,817.41  and  high  of 1,822.17  but  losers  beat  gainers  420  to 345  on  slower  trade  totaling  1.52bn  shares  worth RM1.66bn.

Resistance at 1,826 & 1,850
While  overnight  strength  on  US  stocks  due  to  stronger  earnings  and  stimulus  optimism should  buoy  sentiment,  stocks  may  fall  for  profit-taking  breather  today  as  investors  await the  Budget  announcement  with  bated  breath,  with  the increasing  overbought  technical momentum likely to encourage the selling off of trading positions. Immediate resistance for the index stays at the 6 May all-time intra-day high of 1,826, while next hurdle is at 1,850 where there should be stronger profit-taking resistance. Uptrend support is now at the 10-day moving average which rose to 1,797, followed by1,784, the 30-day moving average, and stronger support from 1,765, the 50-day moving average.

Buy on Weakness MRCB & Wah Seong
Any  price  weakness  on  MRCB towards  the  lower  Bollinger  band  (RM1.45)  or  RM1.38 (23.6%FR) would be good buying opportunity for rebound towards RM1.57 (50%FR), with RM1.66 (61.8%FR) and RM1.76 (76.4%FR) acting as tougher hurdles. Wah Seong has built good support platform above RM1.65, while a confirmed breakout above the 50-day moving average  (RM1.73)  would  target  RM1.80  (38.2%FR),  RM1.87  (50%FR)  and  RM1.94 (61.8%FR) going forward.

Asian Stocks Oscillate on China Worries
Asian  stocks  swung  between  gains  and  losses  on  Thursday,  as  a  strong  initial  economic
indicator for China failed to offset pessimism overits economy. The initial October reading for China's manufacturing activity came out at 50.9compared with a final reading of 50.2 in September. The score was a seven-month high, above the 50 mark that separates expansion and  contraction  in  factory  activity.  Thursday's upbeat reading,  however,  did  little  to  offset fears over the Chinese economy, as China's interbank lending rate moved higher for a second day, reviving fears of a liquidity crunch in June.  In addition, data showing a further rise in house prices earlier in the week increased concernsthat Beijing could step in to cool down the market. Chinese shares slipped in volatile trade on Thursday as a further spike in China's money-market rates tempered the effect of a survey showing a pick-up in manufacturing.

 

China's  benchmark  seven-day  repo  rates  opened  up  nearly  a  full  percentage  point  at  5%
after the central bank let cash drain from the money market for a second week. The Chinese central  bank  declined  to  inject  cash  for  a  third  day  as  regulators  showed  signs  of  concern that  loose  liquidity  might  again  be  fuelling  risky  credit  growth.  Chinese  property  stocks mostly  slid  after  the  official  Xinhua  news  agency  said  that  authorities  would  also  increase scrutiny  of  mortgage  applications  and  strengthen  oversight  of  pre-sales  of  property.

However,  Japanese  shares  rose  on  Thursday,  recovering  from  a  two-week  low  hit  earlier with  traders  citing  domestic  investors  buying  futures  on  the  dip,  offsetting  concerns  over China's  economic  outlook.  The  Hong  Kong’s  Hang  Seng Index  tumbled  164.13  points  or 0.71%  to  close  at  22,835.82,  but  the  Singapore’s  Straits  Times  Index  rose  13.15  points  or 0.41% to 3,217.95.

Upbeat Earnings Lift S&P Higher
U.S. stocks resumed their upward move on Thursday as economic data underscored views U.S.  monetary  stimulus  will  be  in  place  for  the  foreseeable  future  and  as  earnings  offered some upbeat news. Economic data showed initial claims for state unemployment benefits fell less  than  expected  in  the  latest  week,  though  analysts  noted  a  backlog  of  applications  in California.  On  Tuesday,  data  showed  that  employers  added  fewer  jobs  than  expected  in September.  The  day's  data  also  included  a  preliminary  look  at  Markit's  October Manufacturing Purchasing Managers Index, which grewat its slowest pace in a year while factory output contracted for the first time since  late 2009. Ford Motor rallied after beating third-quarter earnings and revenue expectations andraising its profit and margin forecasts. The  auto  maker  also  lifted  its  projections  for  sales  in  China.  Homebuilder  stocks  got  a  lift from PulteGroup’s quarterly earnings report, which showed revenue rising on an increase in home prices and closings. Dow industrial 3M edged up after reporting third-quarter earnings and  revenue  above  analyst  estimates,  helped  by  sales  growth  in  all  business  groups. Telecommunications  stocks  were  the  worst  performers after  AT&T  third-quarter  earnings increased just above estimates, while revenue rose in line with forecasts.

Dow Jones Industrial Average gained 95.88 points or0.62% to 15,509.21 while the Standard &  Poor's  500  Index  rose  5.69  points  or  0.33%  to  1,752.07.  The  technology-heavy  Nasdaq Composite Index gained 21.88 points, or 0.56% to 3,928.96, while the financial index added 0.32 points, or 0.12% to 279.77.

 

by TA Securities

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