Investors ponder market direction

THE KL Composite Index (KLCI) regained some lost ground in recent weeks, as stocks across Asia rebounded from their worst start in years.

Markets experts, however, believe it is too early to “jump in”. They say the market performance is likely to remain choppy in the foreseeable future.

“The buying momentum is not strong in our market, volume needs to be more than one billion on a daily basis to sustain investor interest,” said TA Securities technical analyst Stephen Soo.

At yesterday’s close of 1,293 points, the KLCI was at the halfway point between its recently-established extreme ends for the year. Earlier in the day, it also hit the all-important psychological level of 1,300 points before profit taking set in.

The index had already risen 10.2% from a low of 1,157 points of March 11, but remained 15% down from its 1,516-point record close on Jan 11.

The KLCI had lost 10.5% year-to-date.

While the near-term outlook is expected to be volatile, there are buying opportunities in a market such as this, Soo said, adding: “Buying should not be broad based but selective. The 1,280-level augurs a buy, below 1,260 augurs a strong buy.”

“This is a déjà vu of what happened last August when the market plunged sharply in that despite an inflow of negative news, the market continued to go up,” said Aseambankers Equities Research head Vincent Khoo.

He said the market would remain “firm” in the short term “until more bad news come into play”.

MIMB Investment Bank Research manager of technical analysis Lee Cheng Hooi said the market looked “hazy” in the longer term.

“There is a rebound but it is not strong – it is more of a fractured kind of rise, “ he said.

Lee concurred that there are buying opportunities in a market like this and favoured the oil and gas (O&G), plantation and wood-based sectors.

“O&G because of surging crude oil prices; plantation, thanks to upbeat soybean and crude palm oil futures price; and wood-based counters as prices of these have been badly beaten down for a long time,” he said.

MIMB’s Lee sees support KLCI levels at 1,264, 1,267 and 1,273 points, and resistance at 1,300, 1,313 and 1,340 points.

In an April 16 report, Citigroup Global Markets said the market had already priced in “a lot of the bad news” and urged investors to start positioning.

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