Bearish outlook on lower CPO price, lack of fresh leads

THE outlook is bearish for the local stock market this week, going by its continuous flat performance last week, especially on the back of falling crude palm oil (CPO) price and the absence of any new fresh leads.

Last week’s performance has been deemed “disappointing” by many analysts. The benchmark FTSE Bursa Malaysia
KLCI index closed on Friday 9.57 points, or 0.51 per cent, lower to 1866.11 points, in line with most regional markets.

“Last week has been a disappointment when it comes to midcap stocks, especially with the CPO price dipping below RM2,000 per tonne, when just a couple of weeks ago it was trading at RM2,700 per tonne,” said an analyst.

“If the price do not rebound soon, we expect to see portfolio balancing as stock holders jump into other sectors that yield better results.”

Another analyst was quick to note that last week’s poor showing should not be attributed to the declining CPO price alone, but the ongoing disappointing Bursa Malaysia performance to-date.

“Our performance pales in comparison to that of Thailand and Indonesia, especially when it comes to midcap stocks.

“Investors are scraping the bottom of the barrel in order to come up with innovative ideas to spice up the composite index.”

For this week, however, analysts believe that there may be some switching out of sectors, mostly from plantation into the stronger construction and property sectors.