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Bursa Malaysia is likely to be volatile next week as investors continue to be jittery over the European debt crisis, coupled with the negative rating of the US economy by Standard & Poor's, dealers said.

They said the negative rating created panic worldwide, resulting in a massive sell-off on Monday.

The local bourse started the week on a choppy note, in line with the regional bourses on news of possible financial crisis.

This resulted in huge sell-off and dragged the FTSE Bursa Malaysia KLCI to below 1,500 level for the first time since March 17, 2011.

Yesterday, the FBM KLCI ended the day at 1,483.67, up 7.21 points from 1,476.46 on Thursday.

For the rest of the week, the market was on roller-coaster ride before it ended on a positive note on Friday.

Affin Investment Bank head of retail research, Dr Nazri Khan, said the Asian markets would likely continue bouncing next week as a drop in the US jobless claims eased concerns about the global economic recovery, boosting global exporters and commodity producers.

At the same time, France's AAA-rating reaffirmation and the European ban on short selling would strongly support global financial stocks, he said.

"We believe the local market has reached the most oversold level in years and this will open door for a short-term temporary rally back to 1,500 resistance level," he told Bernama here today.

Nazri said next week, the FBMKLCI was likely to test the 1,475 support level, which has contained declines during February and March 2011 correction.

"We are now pegging 1,500 as the immediate target for FBM KLCI as at next week. We must caution, however, that oversold situation does not suggest that a final bottom has been seen.

"They do suggest, however, that the sell-off has been overdone and the market is due for a relief bounce," he said.

Nazri warned investors that equity volatility has been extraordinary with dollar/yen and dollar/Swiss franc volatility (two reliable measures of safe haven) jumping to the dangerous peaks seen at the height of the post-Lehman turmoil.

Furthermore, he said, seasonally speaking, September and October had always been weak months.

"Given that and the fact that FBMKLCI is now technically in a new downtrend, we advise buyers to be cautious as we suspect that the FBMKLCI may eventually continue its decline over the medium term after a short-term respite," he said.

Meanwhile, on the corporate scene, Malaysia Airlines and AirAsia hogged the limelight with share swap deal, creating a powerful synergy between them and totally changed the local airline industry landscape.

On a Friday-to-Friday basis, the FBM KLCI dropped 40.76 points to 1,483.67 from 1,524.43 previously.

The Finance Index fell 416.41 points to 14,072.74, Industrial Index declined 43.23 points to 2,715.01 and the Plantation Index lost 384.49 points to 7,208.45.

The FBM Emas Index decreased 33.12 points to 10,147.1, FBM Ace slashed 255.93 points to 3,794.09, FBMT100 erased 304.17 points to 9,963.58 and FBM70 dived 460.92 points to 11,052.20.

Total weekly volume increased to 7.776 billion units valued at RM14.682 billion from 6.020 billion shares worth RM9.858 billion previously.

The main market turnover improved 6.135 billion unit valued at RM14.448 billion from 4.089 billion units valued at RM9.53 billion last Friday.

Volume on the ACE market dropped to 1.033 billion shares worth RM162.075 million from 1.38 billion shares worth RM236.207 million last week.

Warrants rose to 586.675 million units valued at RM64.915 million from 481.029 million units valued at RM71.227 million previously. -- Bernama