More downside seen for local market

Thursday February 24, 2011
More downside seen for local market
By YVONNE TAN
yvonne@thestar.com.my

PETALING JAYA: It may not be the time for bargain hunting yet as there is more downside to the local stock market due to negative external factors.

“It's best to wait it out, the risks are still simmering in the background,” Jupiter Research head Pong Teng Siew said.

A technical market analyst said that with the prevailing external uncertainty and frail sentiment in the region continuing to weigh on the local bourse, compounded by the bearish reading from short-term technical indicators, share prices looked likely to stay in consolidation mode in the intermediate term.

“And they look in great danger of carving out a downtrend channel going forward,” he told StarBiz yesterday.

Investors appeared to be staying at the sidelines yesterday with only 1.7 billion shares being traded compared to the average daily volume of more than 2 billion at the start of the year.

The local benchmark FTSE Bursa Malaysia KLCI had yesterday shed more than 10 points in intra-day trading before finishing at 1,511.11, 2.52 points or 0.17% lower, dragged down mostly by plantation stocks affected by lower crude palm oil prices.

Airline stocks, AirAsia Bhd and Malaysia Airlines, extended Tuesday's losses on high oil prices, losing 6 sen and 2 sen each to RM2.48 and RM2 respectively.

Based on the daily bar chart, Bursa Malaysia has been in correction process since peaking out at an all-time high of 1,576.95 on Jan 6.

“Pivotal support floor is pegged at the recent lows of 1,490.44, followed by 1.474.02 points,” said the technical analyst.

As for the upside, the FBM KLCI would be facing stiff resistance at the 21-day simple moving average (SMA) of 1,524 and 50-day SMA of 1,529, of which a successful penetration will indicate the end of the current correction phase, he said.

“Logically, a new leg of uptrend, or bullish reversal formation would follow suit, if buying momentum remains strong after the positive breakout,” he added.

Pong said that until a clear resolution to the ongoing political turmoil in the Middle East and North African regions was established, market players should be cautious.

“Once there is clear resolution, I believe the market will continue with its uptrend. There is enough liquidity in the system for that,” he said.

Markets worldwide had taken a beating in recent weeks with sentiment turning sour following anti-government protests in the Middle East and North Africa, market downgrades and natural disasters.

Meanwhile, oil prices have peaked to over US$95 per barrel on supply concerns as both the Middle East and North Africa regions are oil-producing regions.

Investors had been taking profit in Asian markets, which registered healthy gains last year, since last month and these recent negative external factors coupled with inflationary pressure in the Asian region were giving them all the more reason to do so, analysts said.