KUALA LUMPUR (Jan 2): The FBM KLCI, which ended 2018 with a whimper and dropped 5.9% year-to-date, is likely to commence trade for 2019 on a cautious note, despite the higher close at most global markets on Dec 31.

Equities around the world rose on Monday as possible progress in resolving the trade dispute between the United States and China engendered some investor optimism in what has been a punishing end of year for markets, according to Reuters.

The U.S. benchmark S&P 500 stock index advanced in light trading volume after U.S. President Donald Trump said he held a "very good call" with China's President Xi Jinping on Saturday to discuss trade and said "big progress" was being made, it said.

On Monday, the Dow Jones Industrial Average rose 265.06 points, or 1.15 percent, to 23,327.46, the S&P 500 gained 21.11 points, or 0.85 percent, to 2,506.85 and the Nasdaq Composite added 50.76 points, or 0.77 percent, to 6,635.28, said Reuters.

Inter-Pacific Research Sdn Bhd in a strategy note Dec 31 said the downswing in the KLCI exhibits all the hallmarks of a bear market at this point. 

The research house explained that 1) Liquidity has been progressively drained out of the market by a drawn-out foreign fund selloff that has drawn in local funds as well as retail participants.  2) Stock valuations remain at elevated levels despite eye-watering drawdowns from peak levels due to a dismal earnings report card for several reporting seasons already.  3) Poor personal income growth following an inflationary bout beginning 2015 that extended into 2017 did no favours for already waning animal spirits among domestic investors.

“Across the rural heartlands and the myriad little towns that serve them, falling agricultural commodity prices weighed heavily on incomes.

“"If corporate earnings continue their disappointing trajectory and turn in flat for the year, our expectation (is) that the KLCI may fall to as low as 1,538 some time in 1H2019. This is still a developing scenario,” it said.

Based on corporate announcements and news flow on Monday, stocks in focus today may include Petronas Gas Bhd, Public Bank Bhd, AMMB Holdings Bhd, Genting Bhd, Genting Malaysia Bhd, Genting Plantations Bhd, Vizione Holdings Bhd, Pintaras Jaya Bhd, Handal Resources Bhd, Ornapaper Bhd, FGV Holdings Bhd, Kronologi Asia Bhd, Yinson Holdings Bhd, Merge Energy Bhd, Malaysia Airports Holdings Bhd, Binasat Communications Bhd and Theta Edge Bhd.