INVEST MALAYSIA LIKELY A BOOSTER

THE FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) recovered from last Monday’s sell-off to a fresh two-month low, sparked by global growth worries after the world’s top two economies posted sharply weaker economic data.

Higher global oil prices sustained by the Organisation of the Petroleum Exporting Countries (Opec)-led output cuts and reduced United States oil inventories and infrastructure contract speculation helped fuel robust trading momentum in oil and gas and construction related small caps.

Sentiment improved further ahead of the weekend after the United Kingdom parliament supported Prime Minister Theresa May’s plan to delay Brexit, as high trading velocity persisted in the small caps space to draw active retail participation.

The FBM KLCI ended up 0.64 points week-on-week to settle at 1,680.54, with losses in Petronas Dagangan (-RM1.45), PPB Group (-26 sen) and Hartalega (-23 sen) offset by gains in Nestle (+90 sen), Press Metal (+29 sen) and RHB Bank (+24 sen).

Average daily traded volume improved substantially to 3.8 billion shares but traded value rose marginally to RM2.64 billion compared with 2.91 billion shares worth RM2.28 billion recorded in the previous week, as trading momentum on lower liners and small caps jumped on active retail participation.

The downside pressure on the index had abated last week after witnessing sustained selling pressure in the last one month, mainly due to external concerns such the US-China trade war, weakness in global economic growth and the impending Brexit on March 29.

That aside, a recovery could follow through this week if the Invest Malaysia 2019 event tomorrow and Wednesday could stir interest in the local equity market.

Prime Minister Tun Dr Mahathir Mohamad’s key note address tomorrow morning will be closely followed to see if there is any interesting announcement that will benefit the economy and capital market.

More clues on the current strength of the nation’s economic recovery and key highlights to bolster private investment and consumption will be highly welcomed after economic growth eased below five per cent yearon-year ( YoY) in the last three quarters.

Last 14-year data showed the FBM KLCI reacted positively post-Invest Malaysia. Average gain frequency and return were 57.1 and 0.6 per cent after two weeks and 71.4 and 1.7 per cent after a month, respectively.

Technical Outlook

Key banking and rubber glove stocks fell on Monday to drag the FBM KLCI lower by double digits, as global growth worries increased after the world’s top two economies posted sharply weaker economic data.

The index slumped 15.27 points to close at the day’s low of 1,664.63, off an early high of 1,680.18, as losers trashed gainers 638 to 266 on total turnover of 2.53 billion shares worth RM2.32 billion.

Stocks rebounded the next day, helped by improved external sentiment. The FBM KLCI rose 6.65 points to close at 1,671.28 on active trade totalling 3.02 billion shares worth RM2.1 billion.

Blue chips rose rose 6.96 points to close Wednesday’s high of 1,678.24, off an early low of 1,669.92, but losers edged gainers 459 to 421 on robust trade totalling 3.99 billion shares worth RM2.38 billion.

Blue chips eased on mild profittaking the following day, but trading momentum in oil and gas and other small cap stocks picked up to dominate activity.

The FBM KLCI dipped 3.72 points to settle at 1,674.52 after ranging between an early high of 1,678.88 and low of 1,673.47, as winners led losers 491 to 400 on a very active turnover of 4.77 billion shares worth RM2.74 billion.

Stocks recovered on Friday and rose 6.02 points to close the week at 1,680.54, off an early low of 1,672.60 and high of 1,683.25, as gainers led losers 485 to 406 on strong turnover totalling 4.67 billion shares worth RM3.66 billion.

Trading range for the local blue-chip benchmark index last week moderated to 18.62 points, compared with 20.21 points range the previous week, as index heavyweights bounced back from a two-month low. For the week, the FBM EMAS Index added 19.95 points, or 0.17 per cent, to 11,759.18, while the FBM Small Cap Index rose another 188 points, or 1.46 per cent, to 13,102.14, as small cap stocks recovered backed by strong retail participation.

The FBM KLCI saw the daily slow stochastic momentum indicator hooking up from the extreme oversold level to trigger a buy signal, but the weekly indicator’s signal line dipped further south. On the 14-day Relative Strength Index indicator, it turned back up for an improved reading of 44.64, but the 14-week RSI levelled for a neutral reading of 42.93 as of last Friday.

As for trend indicators, the daily Moving Average Convergence Divergence (MACD) expanded lower, but the signal line is levelling out, which is also reflected in the weekly MACD’s signal line levelling off. Meantime, the 14day Directional Movement Index (DMI) trend indicator continued to show a trendless market with the ADX line levelling off, suggesting the continuation of weak trend momentum.

Conclusion

Save for the daily slow stochastics buy signal, which implied further upside for the FBM KLCI for a continuation of oversold rebound after recent steep losses, most other indicators reflected weak technical momentum, suggesting the index may trade sideways this week to rebuild support for another upside push ahead.

After last week’s rebound from a fresh two-month low, immediate index supports improved to 1,670, with last Monday’s low of 1,664 and pivot supports from June last year’s low of 1,657 and December last year’s low of 1,626 to strongly cushion downside risk. Overhead resistance remains at the 50 and 30-day moving averages at 1,689 and 1,694, respectively, with next resistance seen from the mid Bollinger band at 1,697.

Prime

Minister Tun Dr Mahathir Mohamad’s key note address tomorrow will be closely followed to see if there is any interesting announcement that will benefit the economy and capital market.

The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.