Bullish momentum to support local market post CNY, ahead of GE14


Bursa Malaysia could test higher with possible Chinese New Year (CNY) rally on the cards, given no major correction on global markets.

Analysts believe the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI), which closed 4% higher in January, may push higher post CNY and ahead of the upcoming 14th General Election (GE14), despite experiencing a pullback yesterday along with its regional peers following the slump on Wall Street last Friday.

The benchmark index closed 0.93% or 17.41 points lower at 1,853.07 points yesterday, the biggest fall since losing 1.1% on Nov 14, 2016, according to Bloomberg data.

Market breadth was negative with 966 counters down compared to 167 up, with 2.66 billion shares traded valued at RM2.85 billion.

Last Friday, the Dow Jones Industrial Average (DJIA) closed sharply lower, falling by 665.75 points or 2.5% to 25,520.96 points, driven by growing concerns about interest rates and inflation expectations.

Rakuten Trade Sdn Bhd research VP Vincent Lau said the momentum on the local market can continue, barring a major correction on the DJIA.

“The bullish run of our local stock market is predominantly led by KLCI index-linked stocks, and overall market should continue to be buoyant,” Lau told The Malaysian Reserve (TMR).

He added that the FBM KLCI uptrend has a spillover effect on the ACE Market as well as small- and mid-cap stocks, which have been in a correction mode.

On top of the much anticipated GE14 rally, Lau reckoned a CNY rally may take place too.

“We advocate buy on weakness as the upcoming results season and GE14 will continue to generate interest,” he told TMR.

Lau expects the market to consolidate this week from overbought positions and should be seen as healthy with the FBM KLCI moving higher since late December 2017.

Hong Leong Investment Bank Bhd’s noted technical indicators suggest the uptrend in the FBM KLCI was intact.

“We think the KLCI’s upside could be limited around 1,860 to 1,870 and support will be pegged around 1,830 to 1,840,” the research firm noted.

Maybank Investment Bank Bhd (Maybank IB) noted it has yet to see any clear visible reversal signal with the exception of bearish divergence in smaller time frame.

“We believe the current upward momentum could last a while longer, but gains will likely be capped at around 1,884 to 1,896 for now,” Maybank IB said.