THE local stock market is poised to extend its rally towards the 1,850 resistance level, building on its past four weeks' momentum, according to Affin Investment Bank Bhd.
On Friday, the FTSE Bursa Malaysia KLCI (FBM KLCI) closed higher at 1,840.35, up 13.4 points from the previous week.
Affin Investment vice-president and head of retail research Dr Mohd Nazri Khan Adam Khan said the benchmark index, which gained 62 points, or 3.8 per cent, since November 14, will continue to hold up well despite the weaker global equities market.
"This is due to the Bursa's defensive appeal, resilient domestic liquidity and its lower vulnerability to foreign investor withdrawals," Nazri said.
In a weekly market analysis, Nazri said the rising buying momentum rides on three significant factors.
They include Bursa's safe haven status and defensive appeal amid tapering volatility, and more rotation play towards small-cap stocks due to the Chinese New Year and Christmas rally.
"Another factor is portfolio rebalancing with institutional funds positioning ahead of the year-end towards 2014 Budget beneficiaries," he added.
Better corporate earnings and higher local equity prices are also expected in the medium term, driven by strong investment flows into Malaysia.
According to the Malaysian Investment Development Authority, the country's approved investments rose 26 per cent to RM136.9 billion in the first nine months of the year compared with the same period a year ago.
Resource stocks are this week's picks as commodities recover and the ringgit depreciates.
These include oil and gas, plantation and glove stocks such as SKPetro, Yinson, Hibiscus Petroleum, Prestariang, SOP, Boustead, Kim Loong Resources, Kossan, Supermax and Adventa.