FBM-KLCI Correction Could Be In The Horizon

As we near the end of 3Q09, FBM KLCI likely to move sideways, even after rising 13% since end-Jun. Base on some report statistic, this rates KLSE stock exchange as the third worst performing market among the 11 Asian markets that report tracked, better than only Japan (+3%) and China shares listed in Hong Kong (+10%).

The top winners in the current quarter are Korea (up 22% quarter-to-date), Thailand (+21%) and Indonesia (+21%). On a year-to-date basis, we have fared even worse – at the second lowest rung (up 39%) just ahead of Japan (+16%) – way behind the best performers like Indonesia (up 80% so far this year), India (+73%) and Thailand (+60%). This statistic show that foreign investor is not going to invest into Malaysia like as before economic crisis. I think Malaysia goverment have note this early by change KLCI index base on 100 share to 30 share and FBM-KLCI index can be control by top 5 share out of 30 component share so that the index will not drop a lot compare with other 11 Asian markets.

How worst Malaysia economic in real I think only government will know. However the Malaysia government need to keep the index in good shape even how worst it is due to political reason so I think profit still can get in ours share market. Forward to domestic themes ahead, focusing on specific events like the 2010 Budget, the announcement of a National Automotive Policy (NAP, likely in Oct) and the impending listing of mobile telecommunication heavyweight Maxis (by year-end) will likely to give some energy to the index.

Closer on the calendar, on Wednesday (30 Sep), the monthly banking statistics for Aug will be out. And this Friday (2 Oct), an update on the business transformation plan by Malaysian Airline System – a laggard among the index component stocks – is scheduled to be held.





















Meanwhile base on HwangDBS report, supposing that the FBM KLCI has already plotted a fresh (temporary) peak on the chart last week, a correction could be in the horizon. Still, if recent history repeats itself, any market pullback is expected to be shallow (down by less than 7%) and short (extending fewer than seven days). Essentially, the benchmark index’s uptrend pattern – as guided by a rising channel comprising higher highs and higher lows – seems set to stretch on.
Technically speaking, should our market slide the first and second support lines are seen at 1,190 and 1,160, respectively. Beyond the consolidation phase, we reckon the FBM KLCI will get back in position to overcome 1,230 (the immediate resistance barrier) before sizzling its way towards 1,255 (its next resistance target).