Trend has remained intact (ext: Edge)

The local market should remain solid and defensive on July 30 after a minor correction the previous day, following profit-taking activity by smaller institutions after regional markets were spooked by the slide in Shanghai, said analysts.

However, the weaker close on Wall Street could put a dampener on the investors' enthusiasm. There were concerns that China might be ready to hit the brakes on lending, a move that could curb demand and hinder the global economic recovery.

Maybank Investment Bank Bhd's (Maybank IB) head of retail research and chief chartist Lee Cheng Hooi said it was not likely that there would be much intense buying activity at the start of trading as the market had already seen a slight rebound.
"The technical rebound happened within intra-day trading yesterday," he said. "What happened was some profit-taking action by the smaller guns, but the trend has remained intact. Valuations have run ahead of fundamentals a fair bit."
Major regional indices, taking cue from a sharp 5% drop in both the Shenzhen and Shanghai index, finished lower, save for Japan's Nikkei 225, which finished marginally higher.
The drop in the Chinese markets was attributed to a decision by the two biggest state-owned banks, Industrial and Commercial Bank of China (ICBC) and China CONSTRUCTION [ ] Bank (CCB), to put a ceiling on their new loans for the year.
According to reports, the move was made to rein in the spate of aggressive lending in light of concerns over credit risks.
Lee said initial indicators showed that the effect of the tightening of credit in China seemed to have been confined to the Chinese bourses, with its closest neighbour, the Hong Kong stock exchange, taking only a slightly greater knock than the rest of the region. The Hang Seng dipped about 2.8% yesterday.
The FBM KLCI's fall of about seven points — to 1,164.48 points — did not break through support levels, Lee said. "The local rally is probably being led by local funds otherwise the reaction (to the China news) would be more drastic."