Trading for the weeks ahead in the local bourse is expected to continue to remain subdued until February as all eyes remain on the developments in the US-Iraq conflict.
However, after February, dealers expect a clearer picture to emerge, hence making it easier for investors to make clearer investment decisions on the equity market.
Until then however, the same concerns are likely to continue to weigh down on equity markets the world over. “Just because it's a new year, this doesn't mean we've got a clean slate to work on. There are still the same uncertainties rocking investor sentiment – heightened fears of war between the US and Iraq, rising geo-political tensions and a general malaise plaguing the global economic landscape,” he says.
How things pan out between now and then will determine if the market will witness a broad-based rally ahead of the Chinese New Year festivities in early February.
For the week ahead, K & N Kenanga chartist Chan Ken Yew expects the market to trade within a tight band of between 625 and 650 points. At present, he claims this expectation is supported by the fact that market volume is very thin and market breath is also very narrow. In short, a general disenchantment seems to have taken hold of market participants.
Chan says: “We are expecting the market to undergo a pullback or correction for at least the next one to two weeks. Only then can it overcome the psychological 650 mark to test the next level of 665 points.”
The week proved to be a let down for the local bourse. The last trading day of 2002 saw the Kuala Lumpur Composite Index (CI) close at 646 points, which was 50 points lower than it was at the start of the year. The CI shed nearly 14 points to close at 632 on Thursday - the first trading day of the year - on the back of profit taking following the window dressing activities that had lent support to the market in earlier weeks. The same counters that had been buoyed by window dressing activities came under selling pressure. The CI closed yesterday at 633.5 points, down almost 17 points from last Friday’s close of 650 points.
Not much encouragement came from Wall Street over the week as stock prices closed slower end 2002 for the third consecutive year. The last time it witnessed a three-year losing streak was from 1939 to 1941.
Economists canvassed by foreign news agency Reuters say that the war against Iraq – whether and when it happens and how long it lasts – is the key to changing the economy's fortunes in the new year. The Dow Jones Industrial Average gained 266 points or 3.19 per cent on Thursday to 8,608 points. The Nesdaq, meanwhile, put on 49 points or 3.69 per cent to end the first trading day of the year at 1,385 points.
Singapore, meanwhile, managed to escape recession by a narrow margin in the fourth quarter of 2002, after growing an annualised 0.1 per cent in the quarter.
On the local front, heavyweight Malayan Banking Bhd – a key component stock of the CI – emerged as the top loser on Tuesday after losing 45 sen and dragging the market down. It, however, bucked the market's downward trend on Thursday to recoup some of its earlier losses.
Pohmay Holdings Bhd shares, on the other hand, plunged on Thursday ahead of the Tuesday listing of its 27.5 million new shares arising from the company's bonus issue.
Bus operator Park May Bhd announced yesterday that it plans to dispose of its 20 per cent stake in electronic toll payment card operator Rangkaian Segar Sdn Bhd to a main board-listed information technology-based company to reduce its debts.