Analysts bearish on KLCI crossing 1,100-point level

TECHNICAL analysts expect the Malaysian stock index to face strong resistance in breaking the next formidable barrier of 1,100 points after rallying for three months now.The Kuala Lumpur Composite Index (KLCI) has already risen by some 253 points, or 30 per cent, since the uptrend began on March 12. It closed at 1091.17 yesterday.

OSK Research's Shin Kao Jack believes it would be a formidable task for the index to breach the next major resistance of 1,100 points as the market is already hovering in overbought territory."A large dose of optimism and a bit of luck are certainly what the bulls need to crack above this heavy resistance," the technical analyst said in a report yesterday.

He nevertheless maintained his "firmly bullish bias" view on the market for the near- and mid-term.PM Securities too, in a note yesterday, said the overall technical picture suggested "strong sell signals".

"We think there's a 45 per cent chance for the KLCI to get to the 1,100-point level and a 55 per cent chance for it to correct," remarked Maybank Investment Bank's chief chartist, Lee Cheng Hooi, who is also the head of retail research.

Should the KLCI cross the 1,100 mark, it would be its highest level since August 29 last year.HwangDBS Vickers Research noted that even if the index were to get past the 1,100-point hurdle, the multi-week rally would likely peak somewhere beneath its next major resistance of 1,125 points.

"We still believe the downside risk outweighing upside potential on our Malaysian bourse in the near term," it said.It pointed out that the steeper and faster the index shoots up in an uninterrupted manner without the usual intermittent technical corrections, the more anxious investors should be.

"This scenario simply means any market pullbacks eventually will be sharper, and it will probably come sooner rather than later," it cautioned clients in a report yesterday.The index managed to close in positive territory yesterday - it was up by 0.09 per cent - despite most regional markets being depressed.

It has risen by 24 per cent so far this year.HwangDBS noted that many major indices in overseas markets have either already, or have almost, recovered to where they were in September 2008 just before the global financial meltdown intensified.