| BURSA MALAYSIA: Share Market May See Correction And Volatility Next Week | |
KUALA LUMPUR, April 17 (Bernama) -- Share prices on Bursa Malaysia are probably heading for a correction and volatility next week after the recent rally, due to a possible tight supply of money, an analyst said.
"We are probably entering a critical point, specifically when money supply (M1) increases to the 20 percent range. In February, the M1 was 15 percent," said Analyst and Head of Research of Jupiter Securities, Pong Teng Siew.
M1 includes the transaction deposits of banks and cash in circulation.
If the money supply continues to climb next week, then the market is in the right condition for a 10-15 percent correction.
"It will not be a bear market but the drop will be significant," he said.
He also said that based on indicators, when money suppy reaches a certain level, Bank Negara Malaysia will remove liquidity and the market has a steep correction.
However, he said when this would exacty happen, is difficult to predict.
"It could even be next week, so investors have to trade cautiously. They have to be even more cautious than before, the stock market rally began last month," he cautioned.
Pong said the money market interest rate has also been on an uptrend, especially for the three-month Kuala Lumpur Interbank Offered Rate (KLIBOR).
"The balance sheet of our banks is also showing less liquidition with deposit to loan ratio at 80 percent, which is another indication of tight supply," he explained.
Asked if the rising ringgit rate against other major currencies will boost the market, he said, the bond market is more likely to benefit from it.
"Unless the carry trade is very large, a portion of it will flow into the stock market. Otherwise, it will just be a short term boost," he indicated.
The ringgit came close to a fresh two-year high against the greenback. It advanced to 3.1785 this week, the highest since May 2008.
On Friday, it ended at 3.1880/1920 versus the US dollar, compared with Thursday's close of 3.1925/1965.
TA Securities in its research report on Friday said that a re-test of the recent high of FBM KLCI's 1,347 level and then a challenge of 1,354, is still plausible as the index continues to consolidate and build support above 1,334.
"A confirmed breakout above 1,347 will accelerate upside towards 1,354. A decisive breach above this level, will bring it up to the next resistance point of 1,380," said the research house.
Meanwhile, ECS ICT Bhd was listed on the Main Market on Thursday. Its share opened at RM1.52, six sen higher over its offer price.
The stock exchange started the week on a stronger footing but drifted towards the end of it, as investors opted to lock in short term profits.
On a Friday-to-Friday basis, the FBM KLCI was down 1.21 points to 1,332.77.
The FBM Emas Index fell 35.99 points to 9,050.6, the FBM Top100 Index eased 22.13 points to 8,780.12 and the FBM ACE Index dropped 87.81 points to 4,207.32.
The Finance Index shed 38.98 points to 11,967.83, the Industrial Index added 12.71 points to 2,754.35 and the Plantation Index rose 24.24 points to 6,517.42.
A total of 4.812 billion shares worth RM7.279 billion changed hands during the week just ended, slightly down from the 5.842 billion shares worth RM7.821 billion the previous week.
Volume on the Main Market also shed to 4.063 billion shares worth RM4.084 billion against the 4.861 billion shares worth RM7.546 billion previously.
The ACE market volume declined to 273.698 million shares worth RM49.172 million from 307.535 million shares worth RM49.368 million previously.
The volume of call warrants slipped to 387.359 million worth RM96.85 million from 492.586 million units worth RM111.235 million previously.
-- BERNAMA
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