Analysts see profit-taking in M'sian market this week

KUALA LUMPUR: THE local bourse, which has been up for three consecutive weeks, could see some profit-taking activities this week as the market consolidates and investors unwind their positions ahead of the Hari Raya holidays, analysts said.

An analyst at HwangDBs Vickers Research sees a mild correction on the cards for the local bourse with the upcoming holidays and the market run-up recently.

“The local bourse has gone up for the past few weeks and the momentum could be difficult to sustain. The market could be in for some correction as it is in an overbought position.

“However, we do not see a major trend reversal. Generally the outlook remains positive,” the analyst said.

He added that most of the smaller markets in the region, such as Malaysia and Thailand, were doing well as funds were being diverted into the markets due to the uncertainty in the United States and Europe.

HwangDBS said the next resistance level for the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) could be at 1,435 while the next support level is at 1,415.

The FBM KLCI closed down 5.40 points to 1,435.67 on Friday due to profit-taking activities.

However, on a week-on-week basis, the FBM KLCI had risen 24.62 points or 1.7% last week.

Kenanga Investment Bank Bhd research head Yeonzon Yeow concurred that there could be some profit-taking activities for the local bourse this week as investors might not want to hold their investments over the long holiday.

“That said, the market is robust and bullish now and a correction is not taking a grip.

“It is moving on its own momentum, driven by foreign participation as money could be brought in to gain from the appreciating ringgit and also to buy liquid large caps on a rotational basis,” he said.

Yeow believes plantation and utilities stocks, which have yet to be in the limelight in the past weeks, could be the focus of investors this week. “These are two big sectors that will move the index,” he said.

Jupiter Securities research head Pong Teng Siew expects the market to be in for a bit of pullback as banking stocks have been on a run-up for a while and may be on a “pause stage” with investors taking profit.

“This will pull down the index as banking stocks carry more than one third weightage.

“Nevertheless, the downside is limited as there is strong buying support from state-led funds such as the Employees Provident Fund, Khazanah Nasional Bhd and other institutional funds,” he said.

He sees a quiet week ahead for the local bourse as some investors go for extended holidays, with the school holidays and Raya break coinciding with each other.

Pong has a trading range of 1,410 to 1,455 for the FBM KLCI.

He has a cautious outlook for the economy and stock market for the second half of the year as he foresees a period of economic slowdown globally which will impact companies.

Last week the Dow Jones Industrial Average was up 2.93% to 10,447.93 and the broader S&P 500 index soared 3.75% to 1,104.51.

A slew of economic data, led by a better-than-expected employment report and strong manufacturing numbers, increased optimism that the US economy was on a recovery track, albeit at a slower pace than hoped for.

The Labour Department on Friday said the US economy lost 54,000 jobs last month, much less than most analysts’ expectations.

On the homefront, the Industrial Production Index for July is scheduled to be announced on Thursday.

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