Budget Euphoria, CI Futures & KLCI

Budget 2007 presented by the PM on Friday is generally a good all-round budget. Nothing spectacular but it is an expansionary budget with goodies for everyone including corporations esp the reduction in Corporate taxes by 1% each year over next 2 years. This reduction is still quite minimal & will not have a significant impact on listed companies. But overall its another feel good budget which may see a 1 or 2 day euphoria before reality dawns & it falls back into a corrective mode. Longer term the Budget is very positive for the market & I see the CI hitting 1021 by February 2007.

Futures - In the meantime technically the CI Futures Index (FKLI) is hitting a strong resistance at 960. This level stopped the FKLI rise on 2 recent occassions on 3 Aug 2005 & 8 May 2006. It may do the same again this week. However some euphoria over the budget may see it rise temporarily but overall it will probably correct downwards. H'ever if it does break above 960 strongly for at least 3 days then it is possible for it to stage a run towards 1000 but I very much doubt this. The rise so far, since hitting the bottom at 876 on 17 July, has been very steep. When this happens a reversal to correct the overbought situation is normal & expected. Perhaps towards the end of the week this will happen.


KLCI itself should also see some euphoria & a short term rise to 970 is likely. After that we have to be very cautious of the correction because of the rising wedge I mentioned in Friday's article. The correction will be very steep. Pls refer there for the chart.