Market may trade sideways this week
The market pulled back as expected but it started with a bullish note. Stronger ringgit against the US dollar boosted market confidence.
However, the sentiment turned bearish after the sale of Bandar Malaysia to a consortium of Iskandar Waterfront City Bhd (IWCITY) and China Railway Engineering Corp was terminated. IWCITY was suspended for trading on Bursa Malaysia from last Thursday.
The FBM KLCI declined 0.3 per cent in a week to 1,768.06 points last Friday after pulling back from an intraday high of 1,784.80 points last Wednesday.
Trading volume has increased last week and foreign institutions were net buyers.
The average daily trading volume increased from 3.5 billion shares two weeks ago to 3.9 billion shares last week.
The average daily trading value remained firm at RM3.2 billion.
This indicates more lowercapped stocks, which are usually traded by retail investors, were being traded.
Net buy from foreign institutions was RM577 million. Local retail was also net buyer last week at RM20 million.
Net sell from local institutions was RM597 million. The ringgit strengthened from RM4.34 to RM4.33 to a US dollar last Friday.
In the FBM KLCI, decliners out-paced gainers five to four. The top gainers for the week were Maxis Bhd (1.9 per cent in a week to RM6.50), Hong Leong Financial Group Bhd (1.8 per cent to RM17.18) and CIMB Group Holdings Bhd (1.2 per cent to RM5.81).
The top decliners were Sapura Energy Bhd (eight per cent to RM1.84), Wesports Holdings Bhd (3.5 per cent to RM3.86) and Malayan Banking Bhd (2.9 per cent to RM9.30).
Regional market performance was mixed. Singapore and Japan gained but China and Hong Kong fell. Singapore Straits Times Index rose to a 21-month higher last week. European markets were bullish.
Germany DAX Index climbed to a historical high while France CAC40 Index rose to its highest since January 2008. However, the US market was directionless.
The US dollar continued to weaken against major currencies.
The US dollar index fell to a six-month low at 98.6 points last Friday from 99 points two weeks ago.
This has caused commodities prices to decline. Gold price in COMEX fell 3.2 per cent in a week to US$1,228.40 an ounce and crude oil (Brent) fell 4.3 per cent to US$49.47 per barrel.
Crude palm oil rebounded and increased three per cent in a week to RM2,580 per metric ton last Friday.
The FBM KLCI decline last week but managed to stay above the immediate support level at 1,650 points, which is where the short term 30-day moving average currently at.
The short term up trend line is also at this level. This indicates that the market is still bullish.
Technically, the FBM KLCI is in a bullish trend correction and the bullish trend is expected to continue as long as the index can stay above the support level at 1,650 points. F
urthermore, the index is also above the long term 200-day moving average and the Ichimoku Cloud. However, the Ichimoku Cloud is seen to be narrowing moving forward and hence the support for the bullish trend may start to weaken.
Momentum indicators indicate a weak bullish momentum. The RSI is declining but is still above its mid-level. The MACD indicator has pulled back but still above its moving average.
The index pulled back from the top band of the Bollinger Bands but above the middle band. These indicators show that the FBM KLCI is in a bullish trend correction.
The decline last week was weak and the bullish trend is still being supported. Henceforth, the FBM KLCI is expected to remain bullish and test the up trend resistance line at 1,800 points in the short term as long as the index can be supported above 1,650 points.
The FBM KLCI may trade sideways this week as the market waits for catalysts.