KL bourse expected to rally further

INVEST FOR GROWTH

Share prices are expected to continue their uptrend next week as investors are bullish on rosy outlook for global economic recovery, inflow of funds and a pre-Chinese New Year pented-up demand.

According to research houses, there were a string of market-moving news which would give the prices a fillip, including the imminent general elections (GE).

For the week just-ended, the FTSE Bursa Malaysia KLCI Index (FBM KLCI) managed to steadily maintain its record high level since the first trading day of 2011.

The finance as well as food and edible oil-related stocks, hogged the limelight, with telecommunications joining the fray on Friday.

Some mild pull-backs on profit-taking tip-toed in occasionally but were well-absorbed on strong underlying sentiments.

Trading for the week just-ended was brisk with value of stocks hitting as high as RM3.69 billion on Jan 5, 2011, a level not far from the historic value of RM5.567 billion registered on same day 17 years ago.

Maybank started the year with a big bang on the announcement of its proposed acquisition of 44.6 per cent stake in Singapore-based brokerage firm, Kim Eng Holdings Ltd, for RM1.9 billion. Its share ended Friday at RM9.00, down one sen.

China-based sports footwear manufacturer, Maxwell International Holdings Bhd, made its debut on the Main Market on Thursday at 56 sen, for a two-sen premium.

It ended the week half a sen up at 57 sen.

The FBM KLCI surged 53.3 points, or 3.5 per cent, to close at a historic high of 1,572.21, compared with last Thursday's closing of 1,518.91. For the week, the FBM KLCI hit an intra-day high of 1,576.95.

On a weekly basis, the FBM Emas Index rose by 416.89 points to 10,791.87, FBM Top 70 Index advanced 578.93 points to 11,476.83 and the FBM Ace Index jumped 144.90 points to 4,492.46.

The Finance Index surged 559.69 points to 14,416.01, Industrial Index was 96.11 points higher at 2,929.06 and the Plantation Index climbed 212.18 points to 8,248.43.

Total weekly volume surged to 10.7 billion shares worth RM15.255 billion from 3.624 billion shares worth RM5.355 billion last week.

The Main Market turnover rose to 8.657 billion shares valued at RM14.758 billion from 2.602 billion units worth RM5.16 billion previously.

Turnover on the ACE Market appreciated to 453.175 million shares valued at RM81.022 million from 427.229 million shares valued at RM73.747 million.

Warrants increased to 1.517 billion units worth RM382.213 million from 532.831 million shares worth R103.534 million previously.

Affin Investment's head of retail research, Dr Nazri Khan, said the FBM KLCI has more upside in the near term as investors had strong reason to make big bets amid the bullish close of the first week of 2011, to record a weekly gain of 3.1
per cent and the best weekly volume in six months.

He said statistically, the market's performance in the first week of January has proven to be a good gauge of how it would fare for the rest of year.

"Based on our studies of FBM KLCI going back to 1995, gains in the first five days in January reflect the full-year gains with 75 per cent accuracy rate.

"Also, the improving economic indicators and additional stimulus measures from the Group of 3 (US, EU and Japan), are likely to propel more gains in the near term, overcoming headwinds from Europe's sovereign debt crisis and China fiscal tightening slowdown," he told Bernama when asked on the outlook.

He said for the next several weeks, the single most important stock catalyst would be the award of the projects planned under Budget 2011.

"Although these have already been factored in, there is much room for the market to move higher due to the spill-over effects of the huge jobs generated," he said.

Maybank Investment Bank, in its report, said it expected Malaysian equities to scale new highs this year, as funds continued to flow into emerging markets like Malaysia, courtesy of the US' doses of quantitative easing.

Besides the possible GE, other key factors were domestic investment up-cycle from the direct investments and the Economic Transformation Programme, merger and acquisitions, privatisation and divestment by government-linked investment companies as well low interest rates and ample liquidity, it said.

MIDF Research said foreign funds tracking FTSE indices, estimated to be more than US$3 trillion, were expected to flow into the country.

Maybank Investment said as 2011 would be the Year of the Metal Rabbit under the Chinese lunar calendar, the 'metal' element was expected to give the rabbit more strength, resilience and determination.

It set its year-end target for 2011 at 1,710 points for FBM KLCI and taking into account that the market has traded at above 18 times forward earnings in early-2008 amid strong flow of fund and likely to breach 1,800 points.

Affin Investment has set the year-end target for the FBM KLCI at 1,630, MIDF Research at 1,650 and HwangDBS Vickers Research at 1,730.

Strategy wise, Affin Investment picked construction sector as the most promising sector in the near term with Gamuda, MRCB, AZRB, WCT and Muhibah as the best picks for three months holding time frame. -- Bernama