The FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to correct lower next week amid the global overbought situation, caution on the U.S Federal Reserve stimulus tapering statement and thin volume post-Malaysia-Day weekly session.
Affin Investment Bank vice president and head of retail research Dr Nazri Khan said going forward, softer market action is expected after the global stock market hit five-year highs last week.
Last week, MSCI All World, FTSE All World & FBM KLCI gained 12.5 per cent, 12.1 per cent and 5.6 per cent respectively, he said.
"Although we believe stocks should temporarily consolidate, positive signs from the easing Syria geopolitical tension and improved China economy may indicate any weakness is a good buying opportunity," he told Bernama.
Nazri said the upside surprise seen in China's economic data should reinforce expectations that China has overcome the slowdown in activity and will meet its normalised gross domestic product growth target of 7.5 per cent, benefiting most Asian trading partners.
He said broad-based risk appetite should also return and lift global stocks as the US government suggested that it might hold back on a military strike against Syria to allow Russian diplomacy to pressure Syria to cede its chemical weapons.
On the technical front, Nazri said immediate resistance is seen at both July and August high near the 1,780 and 1,800 levels respectively while immediate support on profit-taking pull-back will be at July low and 50-day moving average near the 1,760 and 1,730 levels.
"While the medium-term trends in the market support the bull case, the short-term overbought technical conditions and stiff overhead resistance might need a fresh injection of optimism to overcome," he said.
Nazri said traders might consider buying after some weakness, positioning for a near-term setback to the next support level before a rebound.
Finally, on the domestic front, he said the tabling of Budget 2014 and the expectation of UMNO election play should be market supportive for local sentiment.
"Strategy-wise, aggressive investors should temporarily short index futures while conservative investors should buy dips on Budget 2014 and UMNO-linked stocks which include the likes of finance, consumer and construction stocks," he said.
During the week just ended, shares were on a rally starting Monday and continued for four consecutive days before retreating on Friday.
Foreign buyers were actively trading this week with foreign net buying from Friday up to Thursday amounting to RM670 million, according to Inter-Pacific Research Sdn Bhd head of research, Pong Teng Siew.
As at September 12, foreign participation in the local bourse was about 22.29 per cent, local institutions at 54.59 per cent and local retail at 23.12 per cent.
On a Friday-to-Friday basis, the FBM KLCI improved 47 points to 1,770.8, the Finance Index surged 404.67 points to 16,587.4, the Plantation Index increased 177.05 points to 8,330.75 and the Industrial Index improved 104.68 points to 3,005.75.
The FBM Emas Index jumped 317.23 points to 12,274.59, the FBMT100 Index was 311.17 points higher at 12,028.2, the FBM 70 Index advanced 326.61 points to 13,907.72 and the FBM ACE Index rose 118.54 points to 5,094.39.
Weekly turnover rose to 7.77 billion shares worth RM9.367 billion versus 6.6 billion shares valued at RM7.62 billion last week.
Main market volume increased to 6.266 billion shares worth RM9.063 billion compared to last week's 4.81 billion units worth RM7.3 billion.
Warrants however declined to 283.384 million shares valued at RM42.446 million from 313.36 million shares valued at RM44.02 million last week.
The ACE market volume meanwhile rose to 1.218 billion units worth RM260.001 million from 1.168 billion units worth RM264.57 million last Friday.-- Bernama