Market failed to rally after rebound, further declines expected
The FBM KLCI rebounded two weeks ago but failed to rally as sentiment was bearish especially towards the end of next week.
The US Federal Reserve indicated that they may not raise interest rates this year. This has led to selling pressure in banking stocks worldwide including Malaysia.
Furthermore, Finance Minister Lim Guan Eng proposed windfall tax on banks last Wednesday and this has caused a sharp decline on Thursday. However, the Minister said that there will be no windfall tax.
The FBM KLCI declined 0.8 points in a week to 1,666.60 points. However, the average daily trading value has increased to RM3.7 billion from RM3 billion to RM3.7 billion. This indicates more higher-capped stocks were being traded.
Foreign institutions who were net sellers in the past many weeks turned net buyers as ringgit strengthens. Net buy from foreign institutions was RM86.2 million while net sells from local institutions and retail were RM76.3 million and RM9.8 million respectively.
In the FBM KLCI, decliners beat gainers two to one. The top three gainers were Maxis Bhd (6.1 per cent in a week to RM5.56), Sime Darby Bhd (3.7 per cent to RM2.23) and Press Metal Aluminium Holdings Bhd (2.6 per cent to RM4.72).
The top three decliners were Hong Leong Bank Bhd (4.1 per cent to RM20.40), Hartalega Holdings Bhd (2.9 per cent to RM4.62) and Top Glove Corporation Bhd (2.9 per cent to RM4.43).
Markets were mixed between continents. In Asia, markets were generally bullish but the local market bucked the trend. The increase was led by the China market which its Shanghai Stock Exchange Composite Index rising 2.7 per cent in a week. US, Europe and UK markets fell last week on US Federal Reserve cue.
The US dollar held firm against major currencies. The US dollar Index increased to 96.6 points last Friday from 96.5 points in the previous Friday. The Malaysian ringgit strengthened against US dollar at RM4.06 to a US dollar last Friday as compared to RM4.09 in the previous Friday.
Prices of major commodities gained last week. Price of gold (COMEX) increased for the second week, rising 0.2 per cent in a week to US$1,300.90 an ounce last Friday.
Crude oil (Brent) also gained for the second week, increasing two per cent to US$67.02 per barrel. However, crude palm oil (BMD) fell for the sixth week, declining 2.8 per cent in a week to RM2,066 per metric tonne on high inventory.
The FBM KLCI rebounded from the support level at 1,665 points two weeks ago and has pulled back to this level last Friday. The index failed to climb the resistance level based on the short term 30-day moving average at 1,695.0 points.
Technically, the FBM KLCI is bearish both the short-term and long-term 30- and 200-day moving averages. The index has fallen into the Ichimoku Cloud indicator and this indicates uncertainty. Moving forward, the Cloud turned bearish.
Momentum indicators rebounded last week but still bearish. The RSI and Momentum Oscillator declined and the MACD indicator remained below its moving average. This indicates that the bearish trend has gained momentum.
The FBM KLCI is on the immediate support level at 1,665 points. The market may rebound if the buyers start buying at this level.
However, based on this week’s movement and the bearish chart readings, the FBM KLCI is expected to decline further. If it fails to rebound at current support level the index may decline to the next support level at 1,630 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.