KUALA LUMPUR (Oct 14): Inter-Pacific Securities Sdn Bhd said the FBM KLCI is nearing overbought and this means that a breather is already due.
In its daily bulletin on Thursday, the research house said it was yet another up day on Bursa Malaysia as it closed in on the psychological 1,600 points level in a continuation of rational buying.
It said there were renewed interest in construction and banking stocks and the improved sentiments also resulted in most stocks ending the day on a positive note.
Inter-Pacific said foreign institutions were again active and extending their net buying position, but traded volumes eased further as the recent price surges have left stock prices on the toppish side.
It said as it is, stock valuations have caught up and are well within their historical forward averages, thus leaving little room for them to climb significantly higher.
“This also means that there are fewer compelling buying opportunities with share prices already reflective on their near-to-mid term fundamentals.
“A consolidation is deemed beneficial as it would also allow the recent gains to be digested, but we think there will still be ample support to keep stock prices elevated for the time being, helped by the easing pandemic conditions that are widely expected to drive demand.
“Therefore, any pullback is likely to be mild and should be well supported at the 1,580-1,590 levels with the bouts of rotational interest helping to shore up the market.
“On the other hand, the hurdles are at 1,608 and 1,620 points respectively,” it said.
Inter-Pacific said the rotational buying was also prevalent among the lower liners and broader market shares, but fresh buying has tapered of late.
“The absence of fresh buying may lead to increased profit taking as follow-through buying is waning.
“This is likely to lead to a mixed market environment with the push and pull factors to dictate their near-term performance,” it said.