WINDOW-DRESSING RALLY TO SUSTAIN
DESPITE cautious undertone on the broader market last week, the blue-chip benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) managed a robust V-shape rebound from profit-taking in the previous week’s steep windowdressing gains, with key consumer, banking, plantation, oil and gas and utilities heavyweights contributing most to the rise.
For the week, the FBM KLCI added 7.17 points, or 0.4 per cent, to 1,760.24, with Nestle (+RM2.00, Petronas Gas (+86 sen), HLFG (+60 sen), TM (+40 sen) and KLK (+22 sen) representing most to the index’s gains. Daily traded volume moderately improved to 2.44 billion shares worth RM2.19 billion, compared to 2.21 billion shares worth RM2.73 billion in the previous week.
Window-dressing activities from the local funds are expected to continue over the next four trading days before the year draws to a close. Valuation of the benchmark index is still compelling against its regional peers to attract interest. The FBM KLCI’s 2018 consensus price-toearnings ratio of 15.2 times is still at a significant discount of eight per cent compared to key regional developing economies.
Next year was expected to be a mixed bag with the impending 14th general election (GE) driving up the index in the first half of next year before ending the year at 1,835, based on 16 times calendar year 2019 EPS (earnings per share).
On the local front, the resilient economy, corporate earnings recovery, crude oil price stability and FBM KLCI’s undemanding valuation vis-à-vis regional peers are valid drivers for the equity market. A Barisan Nasional victory would be another plus factor to hold up market sentiment momentarily on continuity in policy matters.
Technical Outlook
The FBM KLCI edged lower on Monday as mild profit-taking activity on selected blue chips weighed on the market, ignoring regional strength on expectations US lawmakers will pass the long-awaited US tax cuts aimed at boosting growth in the world’s largest economy. The index fell 1.43 points to settle at 1,751.64 as losers beat gainers 477 to 400 on turnover totalling 2.40 billion shares worth RM2.16 billion.
The local benchmark slumped the next day as blue chips fell on profit-taking following last week’s steep window-dressing gains and after Tenaga’s share price adjusted lower after going ex-dividend. The FBM KLCI lost 14.69 points to close at 1,736.95 as losers swarmed gainers 576 to 319 on a very robust trade totalling 3.18 billion shares worth RM2.91 billion.
Blue chips recovered on Wednesday to reverse some of the previous day’s steep losses after local fund-buying on key banking stocks helped lift the benchmark off depressed levels. The FBM KLCI rose 9.68 points to end at 1,746.63 as gainers led losers 490 to 396 on a lower turnover of 2.53 billion shares worth RM2.26 billion.
The benchmark recovered further the following day helped by gains in heavyweight oil & gas and consumer names, but the broader market ended mixed in cautious trade. The FBM KLCI added 4.58 points to settle at 1,751.21 but losers beat gainers 481 to 398 on total turnover of 2.47 billion shares worth RM2.06 billion.
On Friday, due to the cautious market undertone, sideways trade persisted with most investors staying sidelined ahead of the Christmas weekend break, but the index spiked up on late buying in selected heavyweights. It gained 9.03 points and closed at the day’s high of 1,760.24 as losers edged gainers 442 to 400 on much lower turnover totalling 1.63 billion shares worth RM1.54 billion.
Trading range for the local blue-chip benchmark index last week moderated to 27.31 points, compared to the large 42.7 point range the previous week, as blue chips dipped for profit-taking correction from a two-month high. For the week, the FBM EMAS Index rose 72.91 points, or 0.6 per cent, to 12,661.75, but the FBM Small Cap Index eased 13.98 points, or 0.1 per cent, to close the week at 16,788.70.
Due to last week’s V-shape rebound, the daily slow stochastic momentum indicator for the FBM KLCI had hooked up back into overbought territory, while the weekly indicator recovered back into the neutral region following the previous week’s buy signal. The 14-day Relative Strength Index (RSI) indicator steadied with a positive reading of 63.48 as of last Friday, while the 14-week RSI improved to a more positive reading of 55.43.
On trend indicators, the daily Moving Average Convergence Divergence (MACD) showed upside resilience following last week’s rebound from a brief pullback, while the weekly MACD indicator’s signal line turned higher and is poised to trigger a buy on further strength. The +DI and –DI lines on the 14-day Direction- al Movement Index (DMI) trend indicator retained a buy mode, while the ADX line is beginning to turn upwards to confirm an emerging trend.
Conclusion
Last week’s V-shape rebound from a brief profit-taking spell turned momentum and trend indicators for the FBM KLCI back into positive mode, signalling good potential for further window-dressing upside in this last trading week ahead of the yearend. Nonetheless, while buying momentum is likely to concentrate on blue-chip heavyweights supporting the index higher, the broader market should continue to lack trading commitments with market players sidelined ahead of the year-end holidays.
On the index, it must sustain above the key 200-day moving average level, currently at 1,756, to boost upside momentum and enable challenge of stronger upside hurdles from 1,765 and 1,782, with the double-top peak of 1,793 and 1,796 acting as major resistance. Immediate uptrend supports are at 1,743 and 1,735, the respective 10 and 50-day moving averages (MAs), followed by 1,729, the 30-day MA, while crucial support will be the December 5 pivot low of 1,708.
Last week’s V-shape rebound from a brief profittaking spell turned momentum and trend indicators for the FBM KLCI back into positive mode, signalling good potential for further windowdressing upside in this last trading week ahead of the year-end.