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       KUALA LUMPUR: Bursa Malaysia is expected to be range-bound this week as investor sentiment is likely to remain cautious due to market volatility, a dealer told Bernama.

       Rakuten Trade Sdn Bhd vice-president of equity research Thong Pak Leng said foreign funds were expected to continue accumulating local stocks to take advantage of the low valuations against regional peers, the national news agency reported.

       “As such we expect the FBM KLCI to trend range-bound and hover within the 1,600-1,620 range for next week, with immediate resistance at 1,618 and support at 1,570,” he said.

       For the week just ended, the FBM KLCI traded mostly lower amid heightened market volatility in the region while tracking the movements on Wall Street and escalating tensions due to the conflict in Ukraine.

       In another development, Bank Negara decided to hold the overnight policy rate (OPR) at 1.75% last Thursday.

       The central bank said the overall recovery trajectory remained on track despite the recent moderation in economic activity due to the Omicron-driven Covid-19 resurgences.

       Meanwhile, Maybank Investment Bank Bhd (Maybank IB) said the current geopolitical tensions had reinforced FBM KLCI’s year-to-date resilience.

       Maybank IB forecast the first OPR hike to be in the fourth quarter of 2022 by 25 basis points to 2.0%.

       “While Asean markets have enjoyed relative outperformance year-to-date, given a combination of economic reopenings, renewed foreign buying and cyclical/value-centric “old economy” benchmarks, Malaysia’s attraction is further enhanced by comparatively advanced vaccination progress, and the market’s broadly positive leverage into the commodities – such as oil and gas, aluminium and crude palm oil – price surge,” the brokerage said in its recent note.

       It pointed out that commodities-related stocks represented 24% of the FBM KLCI’s total market capitalisation.

       Bank stocks, which had a dominant 32% weighting, were also showing strength on inflation and interest rate upside and attractive valuations/yield dynamics, it added.

       Maybank IB maintained its end-2022 FBM KLCI target at 1,710 points based on a forward price-earnings of 15 times.

       “While Bank Negara has not changed its signalling that it only expects to raise interest rates in a moderate and progressive manner, inflationary pressures stemming from a combination of higher commodity/energy prices, supply chain disruptions and volatile food/soft commodity prices are clearly building and may force accelerated monetary tightening,” Maybank IB explained.

       It forecast the first OPR hike to be in the fourth quarter of 2022 by 25 basis points to 2.0%.

       “The risk to inflation/interest rates is clearly to the upside, and more aggressive interest rate hikes will benefit the banks via improved net interest margins, with this growing expectation supporting share price action,” Maybank IB said.

       Meanwhile, CGS-CIMB Research said it expected the FBM KLCI to remain range-bound through the month of March, as the market weighed the positives coming from record-high commodity prices and recovery play from borders reopening against a potential short-term squeeze in profit margins of corporates due to rising electricity, raw materials, labour costs and potential rate hikes by the US Federal Reserve.

       “We expect the index to stay range-bound for March 22 with the upside capped by the strong resistance at 1,618 to 1,625 points,” the brokerage said.

       FBM KLCI is currently trading at 14.4 times the price-earnings of financial year ending Dec 31, 2022, with dividend yields of 3.9% for 2022.

       “We reiterate our 2022 year-end FBM KLCI target of 1,622 points,” CGS-CIMB Research said.

       On a Friday-to-Friday basis, the FBM KLCI rose 12.22 points to end the week at 1,603.94 from 1,591.72 in the previous week.