FURTHER GAINS TO
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.
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.