The FBM KLCI is expected to measuredly regain its upward thrust conceivable towards the last quarter of 2013, approaching the 1,800-level as the "hot money" dust settles, says MIDF Research.

The research house said the key index may be under selling pressures for weeks or even months to come as it may take quite a while for the "hot money" investors to unwind their positions.

"Technically, the market may retreat to close the price gap pursuant to the post-13th General Election relief rally. Hence, in the near-term, we can expect FBM KLCI to experience continued selling pressure towards 1,718 points level," it said in a note today.

MIDF Research said the latest bout of correction is not expected to jeopardise the positive secular trend in the equity market, based on the view that the tapering of quantitative easing (QE3) is conditional upon the US economy performing broadly consistent with expectations.

It expects the timing and intensity of the QE3 rollback to go any length ahead of the recovery in the US real economy which is moving at measured pace.

"Thus, we opine that the knee-jerk market reactions over the tapering QE3 will be transient in nature," MIDF Research said.

The research firm pointed out that during the period when the market was climbing the proverbial "wall of worry", volatility generally rose due to the flare up in the tug-of-war between the so-called optimists and pessimists elements in the market.

"We think it is going to be a bumpy summer (and autumn) rides in the equity market," it said.

The equity markets first reacted to the so-called taper talk pursuant to a hearing of the Joint Economic Committee on May 22.

They were perturbed yet again upon the US Federal Reserve's announcement on June 19 on the matter.

The markets fretted again this past week in anticipation of the release of US Fed minutes due on Thursday which may, or may not, provide clearer picture on the timing and intensity of the QE3 taper.-- Bernama