THE range-bound trading pattern witnessed over the past few weeks is likely to persist over the short term as investors remain on the sidelines waiting for further unravelling of the war story.
Mayban Securities' technical analyst Heddy Humaizi Hussain's advice to retail investors is to use this opportunity to accumulate on weakness.
The Kuala Lumpur Composite Index (CI) is forming a downward trend and indicators are sliding deeper into the oversold region. The overall market is likely to find a support base at 620 points, which was the support level prior to the introduction of Valuecap Sdn Bhd earlier this year, he says.
Heddy sees upside resistance forming at the 645-point level for next week.
Although the valuation for the Kuala Lumpur Stock Exchange is near its historical low now, it is still considered to be rather expensive compared with its peers in the region. As a result, this could be deterring foreign investors from entering the market.
Pundits are claiming that the best bet for investors in this kind of market condition is defensive and high-dividend yielding stocks.
But with the current uncertainties, it is not surprising that investors are refraining from taking up new positions. As a result, trading volume is expected to remain low, averaging 120 million shares a day.
Markets all over the world are weak as investors are anxiously watching the US' every move, according to OSK Securities research head Pankaj Kumar.
US president George W. Bush had said on Thursday that US was prepared to resort to military action to drive Saddam Hussain out, with or without the support of France, Germany, Russia and now China. All this is despite UN chief weapons inspector Hans Blix' claim that Baghdad is co-operating a great deal more now and his team would welcome more time to conduct the inspections.
But with 230,000 US troops amassed in the Gulf region in preparation for war, the dreaded issue appears inevitable. Not surprisingly, Asian markets reacted accordingly and slid deeper into negative territory yesterday.
In the US, weaker than expected retail sales and jobless claims data pushed Wall Street back into the red on Thursday after its brief gains on Wednesday.
The Dow Jones industrial average came of 1.3 per cent to 7,674 while the Nasdaq Composite Index lost 0.9 per cent to 1,303.
Closer to home, the CI shed 7 points yesterday to close at 636 points, down from 647 points last Friday.
On the corporate front, Symphony House Bhd saw active trade following the announcement of its proposed acquisition of Malaysian Issuing House Sdn Bhd for RM2.45 million cash to expand the formers suite of corporate and information technology services. It closed at 92 sen yesterday.
Unisem (M) Bhd figured on the top losers' list for most of the week after management revealed at a recent briefing that the worst is far from over for the chip sector. Its shares have taken a beating in recent months and are now trading below its initial public offering price of RM5.10. It closed at RM4.12 yesterday.
Malaysia Building Society Bhd, which has accumulated losses of RM691.36 million, announced that it would convert its debts of RM280 million with the Employees' Provident Fund into 140 million redeemable convertible preference shares (RCPS) of RM1 each at RM2 per share and Permodalan Nasional Bhds RM50 million deposits into 25 million RCPS at RM2 per RCPS. The counter closed at 29 sen yesterday.