Wednesday, April 27, 2011

FBM KLCI In Directionless Trade, 18 - 24 April 2011 Review

The global market continues to be volatile in respond to the changing global problem and challenges. Investors were worried that the global uncertainty will prolong but at the same time hoping for higher return from riskier assets amid excess liquidity.

On the local front, the equity market traded on more ambivalent sentiment. The FBM KLCI swung between gains and losses throughout the week in rather directionless trading. While we expect some firm buying after the ruling coalition retained its two-third majority in the Sarawak election, the market surprised us again as investors took the opportunity to sell on strength. Furthermore, corporate earnings released during the week were disappointing as companies on general are facing a squeeze in profit margin amid the rising commodity prices. For the week, the FBM KLCI rose 0.8 points or 0.05% to close at 1,522.75 points. The local equity market underperformed regional bourses massively as the MSCI Asia ex-Japan rose 2.1%. Average daily trading value declined 11% to RM1.55 billion, which was 22% below the three-month average of RM2.0 billion.

Equity Market Outlook
The recent consolidation was within our expectation as we see limited upsides for the market in the short term. However, we remain bullish in the medium term as global/regional equity markets and commodities are expected to continue their respective rallies from March lows. We continue to favor construction, banking and property stocks.

Equity Market Strategy
Stock picking is still our strategy with preference for liquid fundamental stocks on weakness.

Source: ING Funds Berhad

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