Market set to stage a technical rebound
The market was most of the time bearish last week but a strong rebound last Friday snapped a two- week decline. The market rebounded strongly as a positive reaction to the tabling of the National Budget. One of the highlight was a reduction in income taxes and this provides gives the people more money to spend, save or invest. The benchmark FBM KLCI increased 0.3 per cent in a week to 1,746.13 points last Friday, after rebounding from a low of 1,736 points.
Trading volume declined last week as market participants were staying in the side-lines ahead of the national budget. The average daily trading volume declined to 2.7 billion shares from 3.1 billion shares two weeks ago. The average daily trading value has declined to RM2.4 billion from RM2.8 billion.
Foreign institutions remained net sellers last week. Net sell from foreign institutions was RM92 million and net buys from local institutions and local retail were RM79 million and RM13 million respectively.
In the FBM KLCI, gainers parred decliners. However, FBM KLCI component heavyweight Tenaga Nasional Bhd bullish performance lifted the index up.
The top gainers for the week were Tenaga Nasional Bhd (4.5 per cent in a week to RM14.96), Axiata Group Bhd (3.5 per cent to RM5.34) and Maxis Bhd (3.2 per cent to RM5.89). The top decliners were YTL Corporation Bhd (6.5 per cent to RM1.29), British American Tobacco (M) Bhd (4.4 per cent to RM40.50) and Genting Malaysia Bhd (four per cent to RM5.02).
Global markets performances were generally bullish last week. In Asia, the bullish performance was led by the Japan’s Nikkei 225 index that rose 2.6 per cent in a week to a historical high at slightly above 22,000 points. The US market was firm and near historical highs.
The European markets were led by France’s CAC40 index which rose to its highest level since January 2008 and Germany’s DAX that climbed to a historical high.
US dollar continued to strengthen against major currencies. The US dollar index increased from 93.7 points two weeks ago to 94.8 points last Friday. The Malaysian ringgit weakened against the green back from RM4.22 to RM4.24 to a US dollar.
Prices of major commodities were bullish in the past one week. However, gold (COMEX) price fell 0.6 per cent in a week to US$1,274.60 an ounce last Friday. Crude oil (Brent) jumped 4.4 per cent to US$60.50 per barrel, the highest since July 2015. Locally, crude palm oil futures increased 2.7 per cent in a week to RM2,817 per metric tonne.
The bearish momentum was strengthening last week but the strong rebound last Friday because of the National budget has caused the bearish momentum to ease.
However, the market is still bearish as the FBM KLCI was not able to climb above the broken support level at 1,750 points.
Chart- wise, the FBM KLCI remained bearish below the short term 30-day moving average and the Ichimoku Cloud indicator. However, the index has rebounded to the long term 200-day moving average.
The bearish momentum has eased. The RSI and Momentum Oscillator indicators continued rebounded from their oversold levels and this indicates that the market is in a bargain hunting mode. However, the MACD indicator is still below its moving average.
Last week, we expected some technical rebound as the index was at its six-month low. However, the market sentiment is bearish and any rebound would also attract sellers like what we have seen in the past one month. At 1,750 points, sellers could be attracted.
The bearish trend reversal from the double-top chart pattern formation is still in valid as the index is below the broken neckline of the pattern at 1,750 points. Henceforth, we expect the FBM KLCI to test this level in the immediate term of a week.
If the FBM KLCI fails to overcome this level, then expect it to trend lower towards 1,710 points. However, we may see a possible change in trend is the index can climb above 1,750 points and stay above this level.