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