Rotational selling likely

Posted on February 6th, 2014

THE local stock market, which is still closed for the Federal Territory Day holiday today, is expected to remain volatile this week as the rotational selling unfolds amid the United States Federal Reserve’s (Fed) measure to scale back its bond-buying programme, analysts said.

"We believe the local market will remain volatile in the short term, hence investors are advised to stay cautious," said an analyst.

Affin Investment Bank said despite the rebound, the recent combination of falling local stock prices and rising volume suggests that the market may be in for a deeper correction.

"The latest price jump is mostly corrective as the FTSE Bursa Malaysia KLCI (FBM KLCI) is deeply oversold with 18 straight down days since December 31 2013," its vice-president and head of retail research Dr Nazri Khan said.

Generally, the benchmark index will now likely to continue to extend its downtrend that started from the historic high of 1,882.

Looking at the trend over the last few months, the FBM KLCI has actually been trending sideways since the massive 131.45-point intra-day gains on May 6 2013.

"Even if the index were to fall another 100 points from the current level, it will still be within the wide consolidation phase that has started since May 6 2013," said an analyst.

While the index is likely to remain weak for the rest of the week, most analysts’ near-term bullish bias view remains unchanged.