Share prices on Bursa Malaysia are likely to stabilise and stage a rebound next week following the strong global overnight rallies driven by the European Central Bank's (ECB) endorsement of unlimited bond buying programme and strong US economic data, said Affin Investment Bank vice president, head of retail research Dr Nazri Khan.

He said ECB's highly-anticipated bond purchasing programme, which would enable the central bank to address severe distortions in government bond markets, would lend support and provide positive spillover to the Malaysian stock market.

"Following the bullish performance of the global stocks and the sharp correction on the local stocks, we expect the FBM KLCI to stage an oversold rebound with 1,630 as the immediate target.

"Ironically, despite the deep selling in the local market, we see strong optimism at the external level driven by the aggressive ECB's unlimited bond buying," he said today.

Nazri expect next Wednesday to be the next market-moving event where Germany's constitutional court was expected to ratify the European Stability Mechanism (new bailout fund) and lend fresh billions of euro to struggling member states.

"On the local front, we observe that the local market sell-off was driven by foreign fund outflow possibly due to the SandP's warning of downgrading Malaysia's sovereign credit rating.

"Given the oversold market situation, we expect the weakness to be temporarily stretched," he said.

On the local front, Nazri said, positive fundamentals remained intact with accommodative central bank monetary policy, huge international reserves, steady ringgit, tame inflation, continuous government spending ahead of the election to provided limited downside risk.

"As for stock picks, given the seasonally-cautious September, we opt for blue-chips that possess resilient business models and good dividends to withstand further sell-off.

"These include telcommunications and consumer stocks such as TM, Maxis, DiGi, BAT, Padini and Dutch Lady.

"We are pegging the immediate support at the psychological 1,600 and 1,580 levels while immediate resistance between 1,630 and 1,655, the all-time index high," he said.

On Thursday-to-Friday basis, the market ended firmer with the FBM KLCI closing 6.56 points higher at 1,624.55 against 1,646.11 last Thursday.

The Finance Index dropped 235.87 points to 14,509.81, Industrial Index fell 53 points to 2,818.39 and the Plantation Index lost 190.96 points to 8,415.63.

The FBM Emas Index fell 156.86 points to 11,072.68, FBM Ace Index dipped 149.55 points to 4,442.08 and the FBM Mid 70 Index fell 183.55 points to 12,252.53.

Weekly volume rose to 6.63 billion shares worth RM8.52 billion from 5.09 billion shares worth RM5.18 billion last Thursday.

Main market volume increased to 3.77 billion units valued at RM8.08 billion from 2.97 billion units valued at RM4.78 billion previously.

Volume on the ACE market increased to 2.53 billion shares worth RM407.04 million from 1.85 billion units worth RM377.1 million last week.

Warrants declined to 288.45 million units valued at RM21.87 million from 229.81 million units valued at RM22.17 million last week. -- BERNAMA