FBM KLCI is in a consolidation mode as the focus shifted to small and mid-cap stocks 

by S BIRRUNTHA / pic by TMR FILE

THE reopening of international borders from April 1 is driving investor interest into cyclical plays such as real estate investment trusts (REITs), tourism-related and consumer products counters. 

Rakuten Trade Research VP Thong Pak Leng said Malaysia equities have been on the rebound with buying interests mainly in REITs, technology and construction stocks. 

He added the FTSE Bursa Malaysia KLCI (FBM KLCI) is in a consolidation mode as the focus shifted to small and mid-cap stocks, he added. 

“The benchmark has broken the 1,600 point level and we maintain our cautiously optimistic view on the market due to foreign funds support and cheap valuations of the local market against regional peers,” he told The Malaysian Reserve. 

Thong expects the FBM KLCI to trade rangebound between 1,590-1,610 for this week with immediate resistance seen at 1,620 and support at 1,580. 

Bursa Malaysia closed broadly higher for a third consecutive day last Friday, with the benchmark FBM KLCI rising by 4.33 points to 1,603.3 points from 1,598.97 last Thursday’s close. 

Thong said investor focus should be on REITs, especially in logistics and hospitality with the full reopening of the economy and the country’s transition to an endemic phase on April 1. 

Retail and tourism-related counters will be benefitted, too.

“We believe the withdrawal of RM10,000 from the Employees Provident Fund will increase money flow into the economy on higher consumer spending capacity. 

“Therefore, stocks related to consumer products and services will benefit too,” he said. 

Hong Leong Investment Bank noted that barring any decisive fall below the support trendline near 1,563 levels, the FBM KLCI’s trend towards 1,600 to 1,620 levels remains intact. 

In a note last Friday, the investment bank said the leg up will be supported by sustained foreign net inflows; high crude oil and crude palm oil prices; Malaysia’s shift into endemic phase and reopening of international borders on April 1 and positive spillover from the MRT3 announcement. 

“Nevertheless, we believe the volatility is here to stay as the risks of fallout from a prolonged Russia-Ukraine conflict, elevated inflation, Federal Open Market Committee’s latest hawkish tilt outlook, as well as the resurgence of Covid-19 mutations worldwide, would exert a heavy toll on global economies,” it added. 

Inter-Pacific Securities Sdn Bhd said despite the gains last Thursday, conditions on Bursa Malaysia are still fluid and the near-term outlook will be largely dictated by overseas events for the time being. 

The broker added this could mean the key index may retrace some of its recent gains over the near term. 

This is in line with the weakness in key global indices with the re-emergence of inflationary concerns as crude oil and other commodity prices remain elevated due to the ongoing geopolitical conflict in eastern Europe that shows little signs of abating. 

Inter-Pacific Securities added the retreat on the local equity market could be mild as the selling pressure is still light and any profit-taking should be easily absorbed. 

“After successive sessions of gains, many lower liners and broader market shares are starting to look toppish. 

“As such, a pullback is in the offing as profit-taking activities may come to the fore with trading activities pausing to allow the trading activities to take a breather,” it noted in a report last week. 

Investor interest will also be focused on Bank Negara Malaysia’s plans to award up to five digital bank licences by the end of this month. Some 29 consortiums are bidding for the licences according to news reports.