FBM KLCI closes off lows

KUALA LUMPUR: Stocks on Bursa Malaysia recovered to close off lows in the afternoon today on advances in major Asian markets as global sentiment improved in anticipation that European authorities will step in to reduce the impact of budget deficit concerns in the region. The benchmark index had earlier fallen by as much as 10.85 points.

At the close, the FBM KLCI lost 1.36 points to 1,233.86 after hitting a low of 1,224.37 points at 9.26am. A total of 773.4 million shares worth RM1.52 billion changed hands with 345 decliners against 293 gainers.

Across the region, Taiwan's Taiex added 2.01% to 7,361.04 points while Singapore's Straits Times advanced 1.91% to 2,745.02 and Hong Kong's Hang Seng rose 1.22% to 19,790.28.

Analysts said the FBM KLCI could have found support as bargain hunters stepped in on oversold stocks after the recent sell-off despite the cautious sentiment over the market outlook.

Maybank Investment Bank Bhd's head of retail research Lee Cheng Hooi foresees the Malaysian stockmarket to undergo a protracted downturn after a 10-month rise by the FBM KLCI from its low of 836.51 last March.

"The market would be selling on any and every rebound rally that emerges from now on. Price turbulence to the downside would be the obvious market pattern for the next few months. (The FBM KLCI) is headed for 1,200 and lower very soon," Lee wrote in note to clients today.

RHB Research Institute Sdn Bhd said investors are likely to stay on the sidelines for the near term despite the Chinese New Year festival around the corner amid uncertainties in regional markets.

"Currently, the 1,250 level stays as the strong support-turn-resistance level on the upside. The strong selldown yesterday (Monday) has confirmed the recent technical breakdown to below 1,250 as well as the derailment from the 10-month uptrend on the FBM KLCI," RHB wrote in a note.

The research firm sees the benchmark's resistance levels at 1,250, 1,265, and 1,276 while Maybank's Lee expects resistance at 1,235 and 1,260 while support levels are found at 1,203 and 1,232.

The local stockmarket's rally in January was interrupted by China's move to restrict lending growth and US lawmakers' plan to curb risk-taking by banks. Lately, updates on Greece, Portugal and Spain's inability to manage their budget deficits had led to a sharp fall in global markets last Friday.

According to analysts, factors which could sustain the Malaysian equity benchmark's performance include the soon to be announced New Economic Model and the anticipation of a stronger ringgit amid signs that the central bank might raise interest rates ahead of the US. Good corporate earnings this month will also lend support to local equities.

Commodity prices rose amid a weakening US dollar with crude oil for March 2010 delivery advancing 47 cents to US$72.36 (RM248.19) a barrel at the New York Mercantile Exchange at 5.40pm yesterday.

Malaysian palm oil for the same month gained as much as RM19 to RM2,573 a tonne after the country's two largest palm oil producers Sime Darby and IOI Corp Bhd predicted that crude palm oil (CPO) prices would remain resilient in anticipation of rising demand from China and India.

Anticipation that CPO stock levels in Malaysia have declined in January this year also provided support for the commodity's rates.

Meanwhile, spot prices for gold climbed as much as US$10.60 to US$1,073.45 as a weaker US dollar spurred demand for the commodity as a hedge against inflation.

The US dollar index, which measures the value of the greenback against six major currencies, fell 0.2 points to 80.09 at 6.07pm following updates that European officials may help Greece manage its budget deficit.