Bursa risks more losses
Wall Street’s leading indicator, the Dow Jones Industrial Average dropped 57.94 points to 17,675.16 the previous Friday, dragged down by a steep fall in Apple shares on news that China had banned sales of iPhone 6 and 6 Plus, saying the designs had infringed a Chinese company’s patent.
But over on the New York Mercantile Exchange, Light Sweet Crude jumped US$1.77 a barrel to US$47.98, as a weaker US dollar boosted the black commodity.
Given the mixed lead from the US, shares on Bursa Malaysia started out the new week little changed in cautious mood, with the FBM KLCI adding 0.75 of a point to 1,624.93, extending the previous session’s gains amid follow-through bargain hunting interest.
Blue chips were directionless initially, but they picked up steam later on renewed buying interest, tracking the bullish European markets and a rally in the Asia-Pacific region on optimism that “Brexit” will not go through.
A spike in the UK sterling further added to investors’ optimism.
Anyway, the upward momentum on the local bourse was largely powered by gains in blue chips amid support by the local funds and it was clearly displayed on the scoreboard.
Despite the key index chalking up some 10.05 points to 1,634.23 at the final bell, the overall underlying mood of the market was clearly divided, with winners, losers and unchanged counters almost equal, numbering 361, 370 and 361 respectively on Monday.
Overnight Dow bounced back strongly the next day, up 129.71 points to 17,804.87 in a relief rally after the latest survey indicated British will choose to stay in the European Union.
Meanwhile, crude oil prices sustained the upward thrust, jumping a hefty US$1.39 to US$49.37 per barrel due to falling output in the US and disruptions from Nigeria to Canada.
Unexpectedly, Asian shares got off to a tentative start, as investors turned wary ahead of Thursday’s “Brexit” referendum vote, as well as Federal Reserve chief Janet Yellen’s testimony before Congress, which may offer some clues about the timing of the next interest rate hike.
Though uncertainty prevailed, they improved later to finish slightly firmer on growing optimism the UK will opt to remain the trading bloc.
Mirroring the regional trend, Bursa Malaysia opened little changed above the flat line, up 0.93 of a point to 1,635.16 and drifted into the red area, touching a low of 1,630.30 in the morning before crawling back slowly to end steadier.
Despite the local bourse rising 3.46 points to 1,637.69, the scoreboard painted a divided market for the second consecutive day on Tuesday.
After a one-day break in mid-week, market sentiment was very much the same on resumption of business on Thursday, with the FBM KLCI flirting between an intra-day high and low of 1,642.15 and 1,634.94 before ending up 2.29 points to 1,639.98 on Thursday as the market nervously awaited the British poll results.
Then, as we stepped into Friday, global equities and futures markets rallied in early session, as an early opinion polls showed the “remain” supporters gaining momentum.
However, as the results started trickling in and showed the “exit” group leading, they took a dramatic turn and plunged in the wake of panic selling.
Tracking the overseas meltdown, the FBM KLCI slumped to an intra-day low of 1,611.88 in the morning before trimming losses in the afternoon to settle down 5.93 points to 1,634 yesterday.
Statistics: For the week, the principal index edged up 9.87 points, or 0.6% to 1,634.05 yesterday, compared with 1,624.18 on Dec 11.
Total turnover for the four-day holiday-shortened week amounted to 5.928 billion units worth RM6.659bil, against 7.169 billion shares valued at RM7.250bil changed hands during the regular previous week.
Outlook: The fears of a global market carnage due to “Brexit” came about yesterday and Bursa Malaysia was not spared initially, but it managed to bounce off the lows later.
Week-on-week basis, the domestic market actually eked out a small plus note, thanks to an earlier gains offsetting yesterday’s declines.
The final results showed Britain had voted to leave the EU. It is unprecedented and in the interim, there will be more uncertainties clouding risky assets.
With more people continuing to fret about Britain’s move tipping the European economy into a recession and putting more pressure on the world economy, as well as worries about interest rate hikes in the US, investors can expect Bursa Malaysia to experience greater volatility this week, unless new catalyst emerges.
Technically, indicators are either weakening or deteriorating, suggesting Bursa Malaysia may drift lower, with more investors moving to the sidelines until clarity returns.
Important support is maintained at the 1,600-point psychological level, of which a crack will see the lower support of 1,568 points, 1,530-1,532 points range and the 1,500 points level becoming vulnerable.
To the upside, the FBM KLCI will face significant resistance at the 1,635 points, followed by the 50-day simple moving average of 1,652 points, and the next, at the 1,6651.670 points area.