Mild Profit Taking Activities to Cap Upside
Late window-dressing interest by certain local funds managed to lift index heavyweights higher on the final trading week for 2009, encouraged further by decent gains on global stock markets as trading ended for the year. The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) gained 8.84 points, or 0.7% last week to close at 1,272.78. On year-on-year basis, the huge double digit gain of 45.2% was pale in comparison to some Asean bourses, which witnessed higher expansions on more robust earnings and economic growth expectations.
Last week’s gain was driven by Public Bank (+32sen), Maybank (+6sen), IOI Corp (+6sen), AMMB (+13sen), Tenaga (+8sen) and KLK (+42sen) representing almost all of the index’s rise. Daily average traded volume and value improved somewhat to 555.9mn shares worth RM744.6mn, compared with the 429.4mn shares and RM678.3mn average the previous week.
China’s move to raise its economic growth figures and Japan’s announcement that its economy will expand for the first time in three years in the year beginning April 1 that was followed by a 2.6% increase in factory output for November had positive impact on Asian stocks last week. It spilled over into the local market when local funds seized the opportunity to shore up the index to close the year on a higher note.
Accumulate High Beta Stocks
Expectations are running high among investors for a follow through in the index’s upside momentum this week but technical and trend indicators are flashing mixed signals. Post window-dressing profit taking pressures could cap any upsides driven by external factors early this week until investors’ participation increase later this week after the long holiday season. Maintain last week’s view to accumulate high beta stocks on price weakness to ride on “January Effect”.
External Drivers Vital
External news and performance of foreign bourses will continue to exert influence on the local market this week. China continued to paint a favourable outlook for its manufacturing sector when it released the Purchasing Manager’s Index for December last Friday. It expanded at its fastest pace in 20 years to a seasonally adjusted 56.6, which surpassed street estimate of 55.4 but the Chinese government is determined to maintain its exports incentive until its sees a recovery in global demand. China also stressed that it won’t make the mistake of ending its stimulus policies too soon. This is positive for Malaysian companies with big exposure in China markets, especially manufacturers like Unisem and MPI which are seeing a huge growth in demand for chips used in the telecommunication and consumer electronics sectors.
The release of the US ISM Manufacturing and Factory Order data for December and November today and tomorrow respectively will shed more light on the state of recovery of global demand as US consumers form the integral part of it. The release of FOMC minutes (for last December meeting) this Wednesday may have some implications on the market depending on the policy undertone but the release of its economic projections for 1Q10 and minutes for January 27 meeting on Feb 17 will be more closely watched.
