Will KLCI Hit Historical High?

Many investors were anticipating a major pullback of the Malaysia stock indexes (KLCI) amidst the toppish technical charts and indicators in the last few days. Interestingly, the futures market is also trading at a major discount to the cash market (stocks), further supporting the above anticipation. However, it appears that the bulls are not prepared to let go as the index continues to charge new high for the year to-date, as it touches 1322.91 on Monday, just a stone throw from the historical high of 1332! The big question is, will the KLCI surpass the all-time historical high, which was achieved in January 1994?

Looking at the regional market performance, it reinforces the view that there are abundance of liquidity in the market, albeit cautions in certain major Asian markets such as Shanghai and Shenzhen index, which have achieved all-time high and both trading at excessive 35 times and 40 times 2007 PE (Price Earnings Ratio) respectively!

In my view, I think the market will hit the historical high. Having gone this far, the sentiment will carry the momentum towards this goal. I believe this may even happen as early as Tuesday (given Wall Street's midday rise)! Thereafter, it's anyone guess which direction the market may take. Personally, I believe there will be a major consolidation before embarking on the next upward momentum in the mid term. Investors are therefore advised to trade with caution and pay attention to external events that may undermine the global markets. The Risk Reward ratio is getting less attractive, I am afraid...