The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) will eye the 1,600 level next week, surpassing the all-time high of 1,597 recorded in July last year.
Head of Retail Research, Affin Investment Bank, Dr Nazri Khan said the better global sentiment and an improved Eurozone credit market, will provide an upside momentum to share prices on Bursa Malaysia.
He said despite the rising oil prices and a dovish, "no-stimulus" statement by US Federal Reserve chairman Ben Bernanke, global equities including the FBM KLCI are likely to price in a more upside momentum on improved sentiment, the European Central Bank's huge liquidity injection, strong US jobs data, positive China manufacturing data and better credit market in the eurozone.
"The improvement in the broader market sentiment can be seen from the global risky assets performance which has gained momentum while safe-haven assets continue to wind down," he told Bernama.
Nazri said the biggest near-term catalyst will be the European Central Bank's 530 billion euros liquidity boost, which is the first round of the bigger one trillion euros financial bazooka to avert a credit crunch, dubbed as a long-term refinancing operation (LTRO).
"We note that market sentiment is supported by stronger than expected US jobs data despite a tempering of expectations for additional stimulus by the Federal Reserve.
"The fact that the US claims for unemployment benefits dipped to a near four-year low, while China's manufacturing Purchasing Managers Index (PMI) data reached the highest level in five months, may suggest that the global economy is healthier than thought with American economic growth on the mend and the Chinese avoiding a hard landing," he added.
He also said there seems to be significant improvement in the eurozone sovereign debt sector, with Italian 10-year yields breaking below five per cent in hitting a six-month low of 4.96 per cent, following the European Central Bank's liquidity injection.
"On a negative note, we believe stronger than expected oil prices can be a downside risk on fragile global economies," he added.
Brent Crude Oil has jumped more than five per cent and briefly traded above $128 a barrel for the first time since 2008.
"Depending on the magnitude and speed of the spike in oil prices, we believe a gradual rise in oil price, should be supportive for net oil exporters, including Malaysia," Nazri said.
He said the fact that the local market has shrugged off rising oil prices, and ignored the negative Bernanke statement while taking a swift positive u-turn, suggests a strong bullish sentiment in the market where every dip should be taken as a buying opportunity.
"As we expect listing and privatisation to gain more hype in the near term, we are recommending investors look at stocks with a rumoured listing exercise to unlock value," he added.
During the week, share prices on Bursa Malaysia showed a mixed trend as investor sentiment was dampened by the high oil prices.
However, the global market sentiment improved with most Southeast Asian stocks posting decent gains on Friday, driven by the improving US economic data and news of the European Central Bank's funding to avert a credit crunch in the Eurozone.
On Friday, the local bourse rallied amid the broader, stronger market momentum in regional equities.
On a Friday-to-Friday basis, the FBM KLCI earned 25.01 points to 1,583.78 from 1,558.77 last Friday.
The Finance Index increased 268.24 points to 14,129.75 from 13,861.51 previously. The Plantation Index increased 47.22 points to 8,678.21 from 8,630.99.
The Industrial Index advanced 61.07 points to 2,926.77 from 2,865.70 last Friday. The FBM Emas increased 153.79 points to 10,946.89 from 10,793.10 previously.
The FBM Top100 increased 155.88 points to 10,731.40 from 10,575.52 last week while the
FBM Ace decreased 8.13 points to 4,702.23 from 4,710.36 and the FBM 70 increased 119.34 points to 12,316.25 from 12,196.91 previously.
Weekly volume decreased to 8.560 billion shares worth RM9.87 billion from 9.635 billion shares worth RM9.345 billion last Friday.
Turnover on the Main Market decreased to 5.601 billion shares valued at RM9.394 billion from 6.055 billion units valued at RM8.741 billion previously.
Volume on the ACE market decreased to 2.109 billion shares worth RM360.681 million from the 2.694 billion shares worth RM477.44 million last week.
Warrants decreased to 810.440 million units worth RM112.830 million from the 870.44 million units worth RM122.012 million last Friday.