Tuesday, July 19, 2011

FBM KLCI Fell, Hurt by Europe's Debt Crisis, 10 - 16 July 2011 Review

Equity
The market endured heavy profit taking after reaching record highs. The local equity market was dragged down by the weakness in global markets due to fears of sovereign debt crisis. The International Monetary Fund (IMF) warns that despite bailout for Greece, Ireland and Portugal, Europe’s debt crisis may spread to core euro zone countries and emerging Eastern Europe. For the week, the FBM KLCI fell 17 points or 1.1% to close at 1,577 points, but managed to outperform the region as the MSCI Asia ex-Japan close sharply lower (-2.1% week-on-week). Average daily trading value on the Bursa Malaysia shrank considerably and fell 18% week-onweek (WoW) to RM1.46 billion (RM1.78 billion previously), which is 7% below the three-month average of RM1.57 billion.

Market Outlook
We believe the local equity market will stage a recovery toward the end of the week. We don’t expect a double-dip situation as corporate earnings remain on the rise, suggesting growth remains intact. We do agree that the recovery is choppy and uneven but the downside should be capped by the consecutive efforts taken by the western countries to solve the debt crisis. If our assumption is correct, the FBM KLCI should bounce back to test the next resistance level at 1,590 points before it tests the 1,600 psychological mark.

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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