EXTERNAL EVENTS MAY INFLUENCE MART
DESPITE the firmer external tone due to robust economic data, which is generally supportive of global growth, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) was dragged lower last week by foreign selling on selected key blue chips.
On the other hand, while blue chips stayed in sideways trade, active rotational trading plays on penny small caps and ACE Market stocks with positive news flows highlighted active retail participation on the broader market.
For the week, the FBM KLCI slipped 8.68 points, or 0.49 per cent, to close at 1,755.32 as gains on Petronas Gas Bhd (+50 sen), Hong Leong Bank Bhd (+14 sen), and IHH Healthcare Bhd (+13 sen) were overshadowed by losses in British American Tobacco (-54 sen), Genting Bhd (-24 sen), Hong Leong Financial Group (-18 sen) and Genting Malaysia Bhd (-12 sen). Average daily traded volume and value surged to 3.26 billion shares worth RM2.01 billion, compared with the 2.45 billion shares and RM1.93 billion average the previous week as the average daily volume was fuelled by robust trading in penny stocks from retailers.
News flows from China and the United States could influence the financial markets this week. China will begin its 19th national congress on Wednesday, when our market is shut for the Deepavali holidays. President Xi Jinping, who should retain his position in this twice-a-decade political meeting, is expected to outline his party’s key agenda for the next five years. This will have big implication on China and wider impact on the rest of the world.
To begin with, China’s announcement of trade data for last month has started off on the right foot. It affirmed improved outlook for the economy and vindicated the International Monetary Fund’s recent upgrade of its economic growth forecasts for China by 0.1 percentage point to 6.8 per cent and 6.5 per cent for this year and the next, respectively. The country’s third-quarter gross domestic product, which will be released on Thursday, is expected to meet consensus growth forecast of 6.8 per cent.
On the US front, the Federal Reserve will release its Beige Book on Thursday. It will provide important indicators on the state of the US economy and influence the monetary policy decision.
Locally, the Consumer Price Index (CPI) for last month will be released on Friday. It should not deviate much from consensus expectations of 4.2 per cent yearon-year growth versus August’s 3.7 per cent as the sustained double-digit expansion in Transport index should fuel pricing pressure on most other CPI components, especially food and nonalcoholic beverages.
Technical Outlook
While blue chips traded sideways, lower liners stayed active on rotational plays on Monday. The FBM KLCI inched up 0.03 points to close at 1,764.03, off a high of 1,765.48 and low of 1,762.26, as gainers led losers 430 to 401 on total turnover of 2.83 billion shares worth RM1.71 billion. Blue chips extended sideways consolidation on the next day. The index slipped 2.9 points to settle at 1,761.13, off an early high of 1,762.64 and low of 1,758.54 as losers edged gainers 418 to 400 on total trade of 2.78 billion shares worth RM1.65 billion.
Profit-taking interest saw blue chips under pressure on Wednesday. The FBM KLCI fell 3.92 points to end at 1,757.21, off an early high of 1,762.97 and low of 1,752.90 as losers marginally edged gainers 420 to 419 on robust turnover totalling 3.18 billion shares worth RM2.31 billion. Foreign selling on key blue chips dragged the index lower the following day. The index lost another 3.21 points to close at 1,754, off the opening high of 1,760.32 and low of 1,751.20, as gainers led losers 455 to 438 on active turnover of 4.33 billion shares worth RM2.39 billion.
Keen rotational trading interest on penny stocks continued to attract retailers’ participation on Friday. The index rose 1.32 points to close the week at 1,755.32, off an opening high of 1,756.17 and low of 1,751.62 as gainers led losers 452 to 396 on lower turnover totalling 3.21 billion shares worth RM1.98 billion.
The trading range for the bluechip benchmark index last week was at 14.28 points, compared with the 13.06-point range the previous week, after blue chips eased back due to foreign selling pressure. For the week, the FBM Emas Index eased 17.95 points, or 0.14 per cent, to close at 12,579.69, but the FBM Small Cap Index climbed 106.97 points, or 0.62 per cent, to 17,231.81 as small-cap stocks continued to attract rotational buying interest to sustain strong gains.
A fresh sell signal was triggered at the lower neutral region of the daily slow stochastics indicator following last week’s correction on the FBM KLCI, suggesting near-term downside bias, while the weekly stochastics stuck to its bearish stance for the immediate term. On the other hand, the 14-day Relative Strength Index (RSI) indicator hooked up for a better reading of 38.60 following last Friday’s mild rebound from a three-day loss, but the 14week RSI hooked down for a reading of 48.80 to suggest downward momentum still existed.
In the meantime, the signal line on the daily Moving Average Convergence Divergence (MACD) trend indicator deteriorated further to imply sustained downward momentum, which is reinforced by the bearish weekly MACD signal line which continued to travel south. In addition, the bearish trend signal on the 14-day directional movement index is retained, with a gradually rising average directional index line suggesting an emerging downtrend.
Conclusion
With most technical indicators for the local benchmark index deteriorating following last week’s profit-taking and selling correction on key blue chips, expect further weakness this week on lower trading volumes as investors could be sidelined due to the mid-week Deepavali break. However, while blue chips congest with mild downward bias, robust trading interest in lowpriced penny and ACE Market stocks should continue to draw keen retailers’ interest.
Immediate support for the index is from the recent low of 1,750, next will be the crucial 200day moving average (ma) uptrend support at 1,741, followed by stronger support at the April low of 1,729. Overhead resistance is at 1,770, matching the 50 and 100-day moving averages, followed by the August 8 peak of 1,782, and then the double-top peak of 1,793 of September 13 and 1,796 of June 16.
News flows from China and the US could influence the financial markets this week... President Xi Jinping is expected to outline his party’s key agenda for the next five years. This will have big implication on China and wider impact on the rest of the world.