FKLI market outlook 25022009

Asian market tumbled on Wall Street slump with Nikkei 225 shed 107.6 pts or -1.46%, STI plummeted -22 pts or -1.37% and HSI plunged 376 pts or -2.86%. However, KLCI closed marginally higher at 894.07, +6.24 pts or +0.7% on strong support from local fund. Meanwhile, FKLI reversed from the red and closed 3.5 pts higher to settle at 887.5. The basis widen to 6.5 pts discount from 3 pts previous day closed. Turnover increased significantly to 12,317 lots from 8,104 lots. Bank Negara Malaysia has announced to cut its Overnight Policy Rate by 50 basis point to 2% to bolster an economy that policy makers say faces an increasing risk of contracting this year.

For today, the unexpected rate cut to boost local economy will bring some positive sentiment to the market, and the overnight surge in Dow Jones could help to lift sentiment. We maintain our call to short at 890 and long at 870. Support 870 and resistance 899.

We can expect more downside for KLCI due to rate cut by Bank Negara indicating more severe economy situation ahead, stock market needs time to digest and reflect the weakening fundamental side of economy.

News Highlight:

Dow Jones gained for the first time by 236.16points yesterday, closed at 7350.94points after 5 consecutive days loss. US stocks prices were lifted as Federal Reserve Chairman Ben Bernanke made a statement that banks need not be nationalized, the statement spurred the surge in banking stocks, such as Citigroup and Bank of America Corp gained more than 20%.

US consumer confidence collapsed as Americans are growing pessimisms over employment prospects, and their financial well-being in future months. Federal Reserve Chairman warned that the gloomy economy situation could until 2010.

HAPPY TRADING