WITH war worries dominating equity markets around the globe, the Kuala Lumpur Stock Exchange (KLSE) has not been spared. The Kuala Lumpur Composite Index (CI) is down 6.81 per cent from its high earlier in the year.
The local stock market is likely to remain on a cautious mode while waiting for the story of the war to unfold.
Trading in the equity market will likely remain quiet until investors get a clearer picture of the current situation, says a head of research.
During the week, the market experienced mild bargain hunting after the CI dipped to a low of 615 points on Tuesday. On a short-term basis, the market has been temporarily oversold with trading volumes reaching very languid levels. On the average, only 200 million shares are traded daily.
OSK Research technical analyst Shin Kao Jack says that the market should be able to sustain its sideway trend as long as the CI remains above the 2002 intra-day low of 614 points. At the moment, the performance of the KLSE would depend largely on the US market. Downside risk, say most dealers, is rather limited.
If the US market can stage a rebound, Shin then foresees a further technical rebound in the local market. Going forward, the momentum would be maintained by trading on a narrow range apart from the increase in liquidity.
The overall market would be better off trading sideways. Retail investors are now staying on the sidelines, says Shin.
A senior research analyst from Surff88.com says that an event to watch out for would be on March 26, 2003 when Bank Negara releases its annual report.
It is very likely that the second finance minister will announce a stimulus package, says the Surf88.com analyst. Although the news is positive, she does not expect any significant immediate impact from the announcement.
The Surf88.com analyst says, however, that stocks to look out for would be stocks that have been facing foreign selling pressure, for example, Maxis Communications Bhd and IOI Corporation Bhd. She is also looking at value-driven stocks such as those with high yielding dividends.
Shin sees the immediate support base at the 614 point level while immediate resistance is at the 642-645 point level.
On Friday, it was reported that US President George Bush is willing to go an extra mile for diplomacy and the Iraq resolution will postpone till next week. The US-sponsored Iraq resolution also faces threats of veto votes by France and Russia.
It appears that the United States is very determined to go to war against Iraq even without United Nations' approval. The United States has also set a deadline for Iraq to disarm its banned weapons by March 17, 2003.
Over the week, several measures were announced to give the capital market a boost. One of these measures included setting a floor for brokers commission given the unhealthy practices of some brokers since the rates were freed up.
Still, there was little reaction in the market among the listed brokers, largely because most don't expect a significant impact from this move due to the lacklustre market.
Large stockbroking company TA Securities Bhd barely nudged following the announcement. It lost 1 sen to close Friday at 48 sen.
AMMB Holdings Bhd and AMFB Holdings Bhd jointly announced on Thursday that AmBank and AmFinance would rationalise certain common businesses and internal operations. Analysts say the merger of these entities is rather imminent. AMMB closed at RM3.48 on Friday.
On Thursday also, Carlsberg Brewery (M) Bhd declared a final gross dividend of 15 sen per share and a special tax exempt dividend of 50 sen per share for financial year 2002, bringing total gross dividend to 94.4 sen per share.
The stock gained 40 sen over the week to close Friday at RM10.40.
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