Share prices on Bursa Malaysia will likely trend lower next week due to an overbought situation.

Affin Investment Bank Vice President and Head of Retail Research Dr Nazri Khan said the benchmark FBM KLCI is now ripe for a pullback after hitting an all-time high of 1,688 last year.

"Uncertainty over the domestic political situation may have had some impact on the Malaysian market, with most investors now expecting the General Election to be called any time now," he said.

Nazri said it is not surprising to see volatile swings to occur, with retailers buying on bargain stocks and institutional funds building a cash reserve chest in the run-up towards election.

"However, any correction should be temporary due to foreign upgrade on Bursa Malaysia coupled with bullish quarter-end window dressing activities," he said.

Further, he said, accommodative Bank Negara policy and lack of urgency for Bank Negara Malaysia (BNM) to raise its key policy rate could be another factor to minimise headwinds.

"Despite the overbought situation, we have yet to see any evidence of distribution to suggest serious market wind-down pre-General Election in the near term," he said.

The FBMKLCI uptrendline remains intact as there could be mild profit taking followed by further upside on the FBMKLCI, he said.

Interestingly enough, he said, despite negative external fundamentals and weaker fourth quarter 2012 local corporate results, there is a very resilient local bull market.

"Hence, given the looming political risk and rotation theme play, we now advocate accumulating-on-weakness mid-cap/small-cap properties/consumer stocks, defensive and apolitical names such as Glomac, Crescendo, Huayang, Tambun, Power Root, Old Town and Apollo," he said.

During the week, the market was in upbeat mood on JP Morgan's "overweight" rating on Malaysian equities and positive US economic data.

However, the market ended lower on Friday due to the weak economic data from Japan. -- Bernama