Bursa likely to extend profit taking

Share prices are expected to undergo further profit-taking next week with the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) possibly retreating to the 1760 points support level

Weak regional sentiment coupled with softer commodities and the declining ringgit would be contributing factors.

The minutes of the recent US Feds meeting showed that policy makers are now ready to start tapering off the central bank’s third round of quantitative easing as early as June.

Affin Investment Bank vice president and head of retail research Dr Nazri Khan said the anticipation will dampen sentiment across the region, as any scale back of the bonds purchase, would limit liquidity flows into Asian emerging assets, including Malaysia.

"However, the medium term local sentiment is increasingly turning towards a gradual equity price melt-up (rather than asset melt down) on improving fundamentals, post the General Election.

"Hence, we believe any correction should be temporary before an uptrend resumes," he told Bernama.

He said the local market is expected to end profit-taking possibly late next week - after the long school holidays - and just before the start of June.

Trading momentum is also likely to accelerate after local stocks consolidate their strong gains.

"Given the bearish seasonality’s of May/June and the FBM KLCI's strong performance over the past four months - FBM KLCI up +10.7 per cent since early February - we see higher probabilities for deeper correction near term," Nazri said.

He also said the softer commodities are likely to drag down local
equities, with light crude oil and crude palm oil down week-on-week 3.3 per cent and 4.1 per cent, respectively.

"With stocks looking ripe for a further pullback or correction, we are recommending investors to start looking for potential support levels and buy quality stocks on dips," he added.

According to Nazri, stocks of choice next week would be banks and services companies such as Public Bank, Ambank, Maybank, Tenaga, Astro and SapuraKencana Petroleum(SKPetro).

"On the local front, despite the school holiday season, we have seen some good headlines to cushion local market weakness," he said.

Nazri said these include the pending floatation of Air Asia X, Petronas Chemicals allocating a RM3 billion capex for its fertiliser plant in Sabah, Berjaya Sports Toto buying a 2.4 per cent stake in REDtone International Bhd and AEON Bhd investing RM240 million for retail store expansion this year.

During the week just ended, the FBM KLCI outgunned the previous
all-time-high of 1,788.43 with an intra-day high of 1,795.59 on May 22, and in tandem with the sterling performance of regional markets amid inflows of domestic and external funds.

However, the market lost its momentum on Thursday ahead of the Wesak Day holiday, on profit-taking as losses on regional markets spooked investors.

Comments by US Federal Reserve Chairman Ben Bernanke that policy makers may scale down bond purchase programmes also caused jitters on global equity markets.

On a week-to-week basis, the FBM KLCI ended 3.90 points higher at 1,773.06 from 1,769.16.

The Finance Index increased 27.37 points to 16,776.38 from 16,749.01 previously.

The Plantation Index improved 60.65 points to 8,289.95 from 8,229.30, while the Industrial Index declined 23.78 points to 3,000.67 from 3,024.45.

The FBM Emas Index increased 44.50 points to 12,316.68 from 12,272.18, with the FBMT100 Index gaining 35.86 points to 12,090.36 from 12,054.50 last Friday.

The FBM Ace Index declined 5.04 points to 4,674.37 from 4,679.41 and the FBM Mid 70 Index increased 79.38 points to 14,171.37 from 14,091.99.

Weekly turnover dipped 10.942 billion shares worth RM11.765 billion from 12.677 billion shares worth RM13.261 billion.

Main market volume slid to 9.378 billion shares worth RM11.478 billion from 10.65 billion shares valued at RM12.588 billion last week.

The Ace market volume fell to 1.315 billion shares worth RM211.266 million from 1.727 billion units worth RM265.042 million previously.

Warrants declined to 228.938 million units worth RM39.439 million
from 272.137 million shares valued at RM35.623 million.-- Bernama

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