Tuesday, June 21, 2011

FBM KLCI Rose 0.5% For The Week, 12 -18 June 2011 Review

Equity
The local market was extremely unpredictable, moving away from the consolidation phase and closed higher at 1,563 points last week, even though the global and regional equity markets continued to correct. The local key equity benchmark, FBM KLCI, managed to close up 7.2 points or 0.5% week-on-week (WoW) due to last minute buying support into selected index-linked counters. It outperformed the regional markets for the second consecutive week as the MSCI Asia ex-Japan tumbled for another 2.4% WoW. Average trading volume rose 10% to RM1.59 billion but still 6% below the three-month average of RM1.68 billion.

On the global front, equity markets tumbled as European governments failed to agree on releasing a loan payout to space Greece from default, ramping up pressure on Prime Minister George Papandreou to first deliver budget cuts in the face of domestic opposition.

Equity Market Outlook
Our initial expectation that our local market will fall in tandem with regional markets did not materialize, but instead, it bucked the trend and continued to head north. The resilience demonstrated by the market forced investors to pull back from of their selling. Moving forward, we believe this trend will likely continue in the coming week as we see more positive news flow materializing. Moreover, regional markets are at the oversold position and are poised to rebound.

Technically, the market was in a recovery mode. Despite some weakness at the beginning of the week, the index was able to hold above 1,550 points. The short term trend remains choppy but the market has formed a solid foundation within the 1,540 to 1,550 point range after being tested a few rounds for the past three months. On the upsides, we see 1,566 points as the immediate resistance, followed by 1,576 which is its all-time historical high.

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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