Oversold market likely to stage technical rebound

THE FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to stage an oversold rebound after its recent downtrend on hopes that the new China political leadership will push for more stimulus to support economic growth, according to Affin Investment Bank vice-president/head of retail research Dr Nazri Khan.

Despite the light global volume, encouraging signs from the Chinese economy might support global equity and commodity prices and offset fresh uncertainty over the outlook for the eurozone, he said.

“Given the oversold market situation (a total FBM KLCI decline of 65 points or 3.8% within four straight down weeks and 16 straight down days), we expect the current technical weakness to be overly stretched.

“The firm Asian regional sentiment is also likely to support the local benchmark,” he told Bernama.

He said a well-received auction of Spanish sovereign debt and hopes that eurozone finance ministers would finally release the much-needed bailout funds for Greece might also help sentiment towards riskier assets.

“On the local front, positive fundamentals remain intact as reflected by the recent economic data with accommodative central bank monetary policy, steady ringgit, soft inflation and continuous government spending ahead of the elections to provide limited downside risk.

“On the technical front, we see all stochastic indicators are firmly in oversold levels with the FBM KLCI approaching 200-day moving average (near 1,610 level), which may be ideal for a technical rebound,” he added.

Throughout the week, the local bourse slid lower on the backdrop of global uncertainty due to concerns over the US fiscal cliff and Israel-Palestine crisis.

Investors were mostly on the sidelines awaiting a strong catalyst before participating in the market.

For the week just ended, the FBM KLCI fell by 14.96 points to 1,614.32 from 1,629.28 the previous week.

The Finance Index fell 52.24 points to 14,964.67, Industrial Index shed 27.99 points to 2,770.69 and the Plantation Index eased 138.63 points to 7,883.87.

The FBM Emas Index declined 111.50 points to 11,019.24, FBMT100 was 109.13 points lower at 10,858.32, FBM ACE Index eased 3.80 points to 4,253.85 and the FBM 70 Index slid 161.77 points to 12,113.12.

Weekly turnover rose to 4.79 billion shares valued at RM7.45bil from 2.56 billion shares valued at RM4.58bil the previous week. – Bernama