New Straits Times - - Business - Ex­pressed above is based purely on tech­ni­cal anal­y­sis and opin­ions of the writer. It is not a so­lic­i­ta­tion to buy or sell.

THE FTSE Bursa Malaysia KLCI (FBM KLCI) over­came a shal­low profit-tak­ing dip early last week ahead of the United States Fed­eral Reserve’s (Fed) de­ci­sion to raise in­ter­est rates by a quar­ter point mid­week, be­fore climb­ing to a new 21month high backed by gains in fi­nance, gam­ing and plan­ta­tion stocks.

The rally was fu­elled by the less hawkish tone from the Fed, which lifted the ring­git and oil prices, while strong buy­ing mo­men­tum fo­cused on penny and ACE Mar­ket stocks to boost daily trad­ing vol­umes to near record lev­els.

For the week, the FBM KLCI surged 27.62 points, or 1.6 per cent, to 1,745.2, with most of the gains contributed by Hong Leong Fi­nan­cial Group (+54 sen), Gent­ing Bhd (+49 sen), Pub­lic Bank (+38 sen), KLK (+38 sen) and CIMB (+28 sen). Av­er­age daily traded vol­ume and value im­proved to 3.88 bil­lion shares and RM3.44 bil­lion, com­pared with the 3.24 bil­lion shares and RM2.73 bil­lion av­er­age the pre­vi­ous week, boosted by ro­bust buy­ing mo­men­tum on lower lin­ers, small caps and ACE Mar­ket stocks.

Al­most ev­ery stock mar­ket in the world re­acted pos­i­tively to the Fed’s 25 ba­sis points in­ter­est rate hike last week al­though it was within ex­pec­ta­tions.

Sur­pris­ingly, most emerg­ing mar­ket indices rose as well de­spite the neg­a­tive cor­re­la­tion be­tween their cur­ren­cies and the US rate hike, as it was mainly driven by the weak­ness in the US dol­lar than the strength in their cur­ren­cies.

It was at­trib­uted to less hawkish state­ments from the Fed.

In­vestors viewed sta­bil­ity in the US econ­omy would con­tinue to con­trib­ute pos­i­tively to ex­ter­nal trade in emerg­ing mar­kets and a grad­ual increase in the US in­ter­est rate could lead to sim­i­lar tight­en­ing in this re­gion.

Last week’s pos­i­tive vibes could con­tinue this week and at­test to last two years’ per­for­mance if in­vestor sen­ti­ment re­mains strong. The bench­mark index surged and peaked at 1,867 and 1,729 in April be­fore drift­ing lower to end the year at 1,692 and 1,642 in calendar year 2015 (CY15) and CY16, re­spec­tively.

Tech­ni­cal Out­look

Bursa Malaysia shares edged higher last Mon­day, but prof­ittak­ing checked gains on weak oil prices.

The FBM KLCI rose 4.34 points to close at 1,721.92, off an open­ing low of 1,715.35 and high of 1,722.25, but losers edged gain­ers 497 to 473 on strong turnover of 3.78 bil­lion shares worth RM3.08 bil­lion. While blue chips stayed in con­sol­i­da­tion the next day, the bulk of trad­ing in­ter­est fo­cused on small cap and ACE Mar­ket stocks, specif­i­cally in the oil and gas, con­struc­tion and prop­erty sec­tors.

The FBM KLCI ended up 0.55 point to 1,722.47, after rang­ing be­tween high of 1,727.39 and low of 1,719.12, as losers edged gain­ers 473 to 444 on ro­bust turnover to­talling 3.92 bil­lion shares worth RM3.25 bil­lion.

Lo­cal blue chips ended lower on Wed­nes­day. The FBM KLCI closed 5.11 points down at 1,717.36, off an early high of 1,719.27 and low of 1,713.92, as losers beat gain­ers 480 to 395 on re­duced turnover of 3.3 bil­lion shares worth RM2.23 bil­lion. Blue chips ral­lied the fol­low­ing day, fu­elled by fi­nance, gam­ing and plan­ta­tion stocks, helped by the less hawkish tone from the Fed which lifted the ring­git and oil prices.

The FBM KLCI surged 19.78 points to close near ses­sion highs at 1,737.14, off an open­ing low of 1,726.12, as gain­ers over­came losers 666 to 286 on bet­ter trade to­talling 3.4 bil­lion shares worth RM3.62 bil­lion.

Stocks sus­tained gains on Fri­day, with the lo­cal bench­mark climb­ing to a new 21-month high en­cour­aged by fur­ther strength in the ring­git and firm­ing crude oil prices, while strong buy­ing mo­men­tum fo­cused on penny and ACE Mar­ket stocks.

The index added 8.6 points to close at 1,745.2, off an early low of 1,739.65 and high of 1,752.1, as gain­ers led losers 591 to 368 on record to­tal turnover of 4.98 bil­lion shares worth RM5.03 bil­lion.

Trad­ing range for the blue-chip bench­mark index last week bal­looned to 38.18 points, com­pared with the pre­vi­ous week’s 27.86 points range.

For the week, the FBM Emas Index added 205.72 points, or 1.7 per cent, to 12,341.34, while the FBM Small Cap Index rose 325.11 points, or 1.97 per cent, to 16,848.46, as small-cap stocks con­tin­ued to at­tract strong buy­ing com­mit­ments from re­tail­ers.

The daily slow sto­chas­tic in­di­ca­tor for the FBM KLCI hooked back up into over­bought ter­ri­tory fol­low­ing last week’s break­out rally, while the weekly in­di­ca­tor’s sig­nal line re­mained stub­bornly in the over­bought zone. The 14-day Rel­a­tive Strength Index (RSI) in­di­ca­tor rose to an ini­tial over­bought read­ing of 70.36, while the 14-week RSI rose to a higher read­ing of 69.52 as of last Fri­day.

Meanwhile, the daily Mov­ing Av­er­age Con­ver­gence Di­ver­gence (MACD) trend in­di­ca­tor is­sued an­other buy sig­nal to off­set the prior bear­ish hook-down po­si­tion, while the weekly MACD in­di­ca­tor re­in­forced its bullish ex­pan­sion mode.

The +DI and -DI lines on the 14day Di­rec­tional Move­ment Index (DMI) trend in­di­ca­tor also reg­is­tered bullish ex­pan­sion on a ris­ing ADX line to con­firm the up­trend.


Daily and weekly mo­men­tum in­di­ca­tors for the FBM KLCI will turn more over­bought if gains ac­cel­er­ate fur­ther this week, which should bring forth a more mean­ing­ful profit-tak­ing cor­rec­tion. None­the­less, strength­en­ing trend in­di­ca­tors and sus­tained ro­bust-buy­ing mo­men­tum on lower lin­ers and small caps should cush­ion down­side to en­able shal­low profit-tak­ing dips, with re­cov­ery in the ring­git, oil prices and sta­ble global mar­kets act­ing as pos­i­tive cat­a­lysts.

As for the index, next up­side hur­dles are at 1,758, the 23.6 per cent Fi­bonacci Re­trace­ment (FR) of the 1,310 to 1,896 up­swing, and 1,782, the 76.4 per cent FR of the 1,867 to 1,503 cor­rec­tion, fol­lowed by 1,800 and the May 18 2015 high of 1,823. Im­me­di­ate up­trend sup­ports are at 1,726 and 1,710, rep­re­sent­ing the ris­ing 10 and 30-day mov­ing av­er­ages.

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