Holding Steady

Following  the  disappointing  global manufacturing  data  and  frail  overnight U.S. stockmarkets, the FBM KLCI ended lower  as  it  endured  another  day  of selling.  All  the  indices  were  painted  in red  and  on  the  broader  market,  profit taking  loomed  among  the  FBM  Small Cap  (-1.27%),  FBM  Fledging  (-1.12%) and FBM Ace (-2.11%) market shares.

Market  interest  dwindled  with  traded volumes  declining  4.6%  to  2.13  bln shares.  Market  breadth  was  broadly negative as losers overwhelming gainers 732-to-179 stocks.

More  than  half  the  stocks  on  the  key index  fell,  led  by  BAT  (-RM2.46), followed  by  banking  as  well  as  oil  and gas  heavyweights  such  as  Hong  Leong Financial  Group  (-30.0  sen),  Petronas Gas  (-24.0  sen),  CIMB  (-18.0  sen)  and SapuraKencana (-12.0 sen). Elsewhere, key  losers  included  Dutch  Lady  (-34.0 sen), Hong Leong Industries (-21.0 sen), Sarawak  Oil  Palms  (-21.0  sen)  and Allianz  (-20.0  sen).  Meanwhile,  Scientex slipped 30.0 sen after its recent run up.

Plantation  heavyweights  like  Kuala Lumpur  Kepong  (+30.0  sen)  and  PPB Group  (+16.0  sen)  were  among  the biggest  gainers  on  the  FBM  KLCI,  while Public  Bank  and  Tenaga  added  4.0  sen each.  Other  major  advancers  were Takaful  (+30.0  sen),  Far  East  (+25.0 sen),  United  Plantation  (+20.0  sen)  and Central  Industrial  Corporation  (+19.0 sen).  ML Global added 30.0 sen after the upliftment of  its  trading suspension since April 2012.

Japanese  stocks  tumbled  2.6%,  the largest  percentage  decline  since  March 2014  to  close  at  a  one-month  low  on weak  global  manufacturing  data.  The Hang  Seng  and  Shanghai  stockmarkets were  closed  in  conjunction  with  China’s National Day public holiday. Meanwhile, major ASEAN indices also closed lower.

The  Dow  closed  marginally  lower  after the  prior  day's  sell-off,  while  small  cap stocks  rebounded.  Statistics  reported that  the  number  of  Americans  filing applications  for  unemployment  benefits unexpectedly  fell  last  week;  a  sign  the job  market  is  sustaining  progress.  On the broader market, the S&P 500  closed flat with six of  the ten main industries  on the  S&P 500 fell, led by energy and raw material shares as Brent crude declined to the lowest level since 2012.

European  indices  plunged  after European  Central  Bank's  President, Mario Draghi, announced that the central bank would begin buying covered bonds, a  form  of  secured  debt,  from  banks  in mid-October and purchase asset-backed securities at some point  in the 4Q2014. However,  market  sentiment  was  frayed as  size  or  value  of  the  purchases  was not disclosed.

THE DAY AHEAD

As it is, the FBM KLCI is finding support at  the  lower  end  of  the  1,838-1,842 support  range  after  investors  were spooked  by  the  fuel  subsidy  trimming announcement  yesterday.  Although  it has served as a formidable support level for the past few weeks, it continues to be under  threat  due  to  the  frail  market conditions and the incessant selling.

Over the near term, however, we expect the level to  hold on the back of  support from  local  institutional  investors,  which may  also  help  to  nudge  the  FBM  KLCI higher  ahead  of  the  long  weekend holiday.  Nevertheless,  we  think  any upside  will  be  mild,  given  that  the general market sentiments are still frail.

There  is  no  change  to  our  view  on  the lower  liners  and  we  expect  retail investors  to  be  vigilant  on  their  shortterm  trades.  Invariably,  this  also  means that the near term upsides will be limited as retail investors will be mostly unwilling to carry too many open positions.

Source: M+Online Research - 3 Oct 2014