Business

Saturday November 21, 2009

Pressure on selling

By TEE LIN SAY


NOW that the local bourse has seen the comeback of prodigal telecommunications company Maxis Bhd, is there more to look forward to post Maxis?

In the last one month up to Maxis’ return on Thursday, the FBM KLCI has risen 2.82%.

With many stocks now at multiyear highs, coupled with the Dow Jones that has returned to the 10,000-digit region earlier this month, could this signal the end of the rally for the time being?

The stronger dollar has also put downward pressure on equities and other riskier investments, including commodities. On a year to date basis, the ringgit has strengthened 2.13% to the dollar at RM3.39.

The dollar’s appeal as a safe haven sent it higher on Thursday after reports on housing and unemployment raised fears that the economy will be weak next year.

Analysts say that the rally has outpaced the prospects for economic growth and the local bourse may continue to see selling pressure.

Economic-wise, Malaysia’s recovery is trotting along, and AmResearch strongly believes that the recession has indeed passed its worst point.

“We estimate third-quarter gross development product to surprise the market, with a much better than expected contraction of -2.5%,” it says.

TA Securities senior technical analyst Stephen Soo says there is some expectation of window dressing this week, although he believes it will be muted.

“With the school holidays here, I believe many fund managers will be on leave and volumes for the market will dwindle,” he says.

He says the listing of Maxis was a “non-event” as expectations built up had been very high.

“With the Dow now at its 30-month high, upside should be capped. Regionally, many markets still closely tag the United States. I see keen profit taking happening, especially at the 1,308 level, which is the high achieved by the Composite Index on April 28, 2008,” he says.

Soo advises investors to take profit for the year. He says that most of the bullish expectations are already priced in the stocks.

“I see some weakness especially among the blue chips. The lower liners will see their usual rotational plays, but even then, I think volumes will peter out,” he says.

A dealer from a local broking house agrees that correction will take place among the blue chips, but he remains positive on small-cap stocks.

“Look for small caps undergoing recovery. These stocks will offer the best returns. The current weakness in market is actually a good time to accumulate,” he says.

Soo has a year-end target of 1,250, and would hence advise investors to sell for this year and start on a clean slate next year.

The CI closed on Friday at 1,274 points. For the week, it was up 4 points.


MAXIS : [Stock Watch] [News]

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