Market set to rally
Strong economic data and inflows of foreign investments helped lift the equities market after a bearish start. After a stronger GDP growth data reported two weeks ago, Malaysian exports have increased 24 per cent on-year for March.
Foreign buying in Bursa Malaysia continued last week. The buying trend can be seen in the past two months.
The FBM KLCI increased 0.3 per cent in a week to 1,776.95 points last Friday after rebounding from an intraday low of 1,759.73 points last Thursday. However, the Malaysian ringgit weakened from RM4.27 to RM4.28 per US dollar.
Trading volume has declined significantly last week as we enter into the Ramadan period. The average trading volume fell from 3.3 billion shares two weeks ago to only 2.5 billion shares last week. However, the average daily trading value declined from RM3 billion to RM2.9 billion. This indicates more institutional participation as higher capped stocks are being traded more.
Foreign institutions continued to be net buyers in Bursa Malaysia. Net buys from foreign institutions was RM216 million while net sell from local institutions and retail were RM142 million and 44 million respectively.
Decliners slightly edge gainers 14 to 13 in the FBM KLCI. The top gainers for the week were IHH Healthcare Bhd (+7.1 per cent in a week to RM6.02), Hong Leong Bank Bhd (+5.2 per cent to RM14.68) and CIMB Group Holdings Bhd (+4.1 per cent to RM6.61). The top decliners were Genting Malaysia Bhd (-5.3 per cent to RM5.70), RHB Capital Bhd (-4.2 per cent to RM5.19) and Maxis Bhd (-4.2 per cent to RM6.19).
Global Markets performances were bullish last week. Most markets in Asia were bullish except China which had a short trading week.
The Hong Kong Hang Seng index as it climbed to a 23-month high. Japan’s Nikkei 225 rose to a 22-month high. In Europe, Germany’s DAX index and London’s FTSE100 index climbed to their historical high.
The US Dow Jones Industrial Average also marked a historical high.
The US dollar has weakened. The US Dollar index declined from 97.4 points to 96.7 points last Friday. This helped lift gold prices. COMEX gold rose 1.2 per cent in a week to US$1,281.50 an ounce.
Crude oil (Brent) fell 4.4 per cent to US$49.95 per barrel. Crude palm oil declined 2.3 per cent in a week to RM2,496 per metric ton last Friday.
Technically, the market trend was still directionless as the FBM KLCI trades between the immediate support level at 1,750 and resistance level at 1,780 points. The index rebounded after falling towards the support level and is now near the resistance level.
The FBM KLCI is technically in a bullish trend. The index remained above the short and long term 30 and 200-day moving averages, up trend channel support line and the Ichimoku Cloud.
However, it has been consolidating for the past one month.
The RSI indicator and Momentum Oscillators rebounded after testing its mid-level. This indicates that the bullish trend is still being supported. However, the MACD indicator is still below its moving average but is hooking upwards.
The market, benchmarked by the FBM KLCI, continued to be directionless last week. It has been directionless in the past one month. A triangle chart pattern was formed in the sideways trend.
Technical indicators have shown more bullish biasness in the past one week. This bullish momentum indication could push the FBM KLCI above the immediate resistance and hence continue its bullish trend.
Furthermore, the stronger economic data and bullish global markets performances are bullish catalysts for the market.
Henceforth, we expect the market to stage a rally this week especially if the FBM KLCI can break above the immediate resistance at 1,780 points. If this happens, the index can be seen moving towards the next resistance levels at 1,800 and 1,860 points.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.