KLCI 2011 Market Outlook & Strategy - "Perfect Super Bull Cycle"

Chart1: KLCI Chart (Source: StockCharts.com)

Chart2: KLCI Chart (Source: StockCharts.com)

Chart3: KLCI Chart (Source: StockCharts.com)

Fundamental Commentary
The KLCI index was trading in a tight range between 1480 to 1530 level in Dec 2010 as anticipated. The market volume has reduced to below 1.0bil due to the year end holiday mood and early book closing by most of the fund managers. Most analysts feel more optimistic and confident with the current economy situation, and have upgraded the market outlook for the 1st half 2011. This was resulted by the convincing economic results improvement in global markets especially in US.

Technical Commentary
The KLCI index has successfully broken-out the upper line of "Symmetrical Triangle". This provides a near term bullish signal to the near term market outlook. Nevertheless, it is importance for the KLCI index to break the strong resistance at 1530 level in order to continue the market rally in year 2011. The bullish market outlook is maintained as long as the KLCI stays above the strong support at 1480 level.

Technical Indicators
Candlestick chart pattern 1: Bearish Engulfing pattern builded on 30th Dec 2010.

Candlestick chart pattern 2: Bullish - Top "Symmetrical Triangle" line brokeout.

MACD: Bullish (Golden-cross signal).
KLCI above 50MA, 100MA & 200MA level: Bullish.
RSI stays at 50 level: Neutral.

Support level

1520, 1500, 1480.

Resistance level

1530, 1550.

Near Term Outlook (1st - Half 2011)
With the current bullish news that the global economy recovery is gaining momentum as well as the improvement in consumer confidence, the global markets shall continue the Super Bull run in the 1st & 2nd quarter 2011. The global countries governments will definitely work harder to ensure the economy recovery is on path. Thus, the near-term outlook for the stock markets are fairly bullish. The undervalue mid-cap to small-cap may again outperform the index link counters in near term.

Long Term Outlook (2nd-Half 2011)
With the expiration of $600bil stimulus package in June 2011 which was implemented in US last year, the sustainability of economy recovery will be tested & it would be a huge challenge for it to move forward then. Apart from that, the emerging markets will also face the challenge to calm down the overheated economic situation and high inflation issue in 2011. Subsequently, they have to raise the interest rates to tackle the high inflation issue. This may also impact the stock market performance directly.

Besides, the EU sovereign debt problem, war threat & political tension between North Korea & South Korea, china economy softening, and emerging properties bubble issues may continue ruin the global economy recovery in the 2nd half 2011. The equity and commodities markets are anticipated revert into bear market due to the softening economy recovery in 2nd half 2011. Thus, it would be a safe & smart decision to clear all the stock holding position or probably just holding the mininum position before entering in 2nd half 2011.

Potential Positive/Bullish News & Incidents

1. Malaysia General Election in 1st-Half 2011.
2. Huge Infrastructure development project like "MRT" worth RM35bil to start construction in July 2011.
3. Continuation of further positive 6% yearly GDP growth.
4. Maintaining Low interest rate to support economy growth.
5. High commodities prices benefit Oil & gas, metals and plantation industries.
6. US $600bil stimulus package expiration in June 2011 continue creating in-flow money to Equity & Property markets.
7. Further strengthening of global economy recovery especially in US & EU.

Risks

1. Failure of sustaining positive quarterly GDP growth may leads economy fall into "Double Recession".
2. Expiration of US $600bil stimulus package in June 2011, challenge for the self-sustaining global economy.
3. Hot money out-flow from emerging markets back to US & EU to impact the equity & property markets.
4. Increase of Interest rate to curb Inflation issue may also impact the economy.
5. Potential of property bubble burst in Asian markets especially in China, Hong Kong, Taiwan, Singapore.
6. EU sovereign debt issue may continue ruin the market sentiment.
7. War threat & political tension between North Korea & South Korea.
8. Potentially ending of a Super bull market due to the long run and overprice condition.

Trading Strategy
1st-Half 2011: Bargain hunting on good fundamental stocks into market weakness.

2nd-Half 2011: Clear/Hold minimum stock position.

Favourite Stocks Recommendations

Finance: Maybank, CIMB, RHBCAP, PBB.

Consumer: CI Holdings, GuanChg, TWS, QL,

Construction: Kimlun, Sunway, Gamuda, Wct.

Healthcare: KPJ, Faber.

Plantation: BStead, TDM, THPlant, TWSPlant, TSH.

Trading/services: Analabs, Kfima, QSR.

Gaming: Genting.

Telecommunication: Axiata, Digi.
Environmental: Cypark.
Oil & Gas: Kencana, Pchem, PETDag.
Industrial: Ajiya, CanOne, DRBhicom, Daibochi, Scientx, HPI, LIONind.