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Monday, February 14, 2011

FBM KLCI Resisted At Fibonacci Retracement 61.8%

FBM KLCI Rebounded Above 1500 Psychological Mark
The bluechips index is expected to fluctuate
between the Fibo R 61.8%
and the 1500 psychological support.
Shares on the local bourse closed mostly higher after a short decline in the morning, led by selected bluechips and bargain hunting in lower liners counters. The FTSE Bursa Malaysia KLCI (FBM KLCI) rose 10.81 points to 1,505.33, pushed by gains mostly in Tenaga and CIMB. It had opened 3.37 points higher at 1,497.89. The market traded within a range of 19.16 points between an intra-day high of 1513.29 and a low of 1494.13 during the session.

The FBMKLCI hit intraday high 1513.29 resisted by the Fibonacci Retracement 61.8% @ 1513.34 which will now be the immediate resistance.

However, the global forecast for the Asian markets is fairly optimistic, particularly in light of calming events in Egypt. News of President Hosni Mubarak's resignation last Friday was received well amongst traders locally and regionally.
With corporate results coming on stream this week, there would be some knee jerk reaction to individual stocks. As such some cautions would be wisely recommended.


Trading volume increased to 1978.39 mil shares worth RM1865.80 mil as compared to Friday’s 1679.87 mil shares worth RM2410.47 mil. Market breadth was positive with 546 gainers as compared to 268 losers.

Among the rising blue chip stocks were Kulim Bhd, which was up 56 sen to RM13.70 and F&N which rose 40 sen to RM15.62 at the close.

Bursa fundamentally intact but still global factors effective
The FBM KLCI’s rebound post Chinese New Year did not last as the positive market sentiment was marred by worries about the impact from China’s belt tightening measures and outflow of foreign funds from local shore back to developed markets. The heavy selling on the last two trading days pushed the benchmark index below the 1,500 point on Friday and this unnerved some investors into panic selling but volume has almost halved compared to last Monday’s 12-month high of 3.2bn shares. The year-to-date correction of 1.7% was far much less severe compared to some regional markets and the reason was obvious as the FBM KLCI only expanded by 19% last year compared to other emerging markets in Southeast Asia like Indonesia, Thailand and Philippines that rose by between 37% and 46%.

Can today's rebound sustain itself? Will the selling forces re-emerge?? Is it the end of this rally??? These are the million dollar questions that would linger on investors’ mind. There is no doubt that the inflow of foreign funds played a crucial role in the recent rally and the outflows have led to some knee-jerk reaction in the market but there is a strong reason for them to come back.

Malaysia’s economic reform initiatives and tame inflationary pressure are the bedrock for a stronger Ringgit against the USD and will be a good pull factor as we roll on into 2011. Besides, with a robust corporate earnings growth of 16.5% on the back of a GDP expansion of 5.4% in 2011, and an undemanding CY11 PER of 14.5x, it is definitely a safer choice of investment compared to some countries in Europe, which may spring another round of unpleasant surprises, and the US which is still slow in recovering from its worst nightmare since the Great Depression in 1929.

Short term volatility (could be painful) Long term gains


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