Market may slip on correction
REVIEW: Shares on Bursa Malaysia started out the week on a soft note, with the FBM Kuala Lumpur Composite Index (FBM KLCI) shedding 1.50 points, or 0.08% to 1,774.72 on follow-through selling pressure, mirroring a dismal performance on Wall Street the previous Friday amid scepticism about president Donald Trump’s ability to deliver on progrowth economic agenda and tax reform.
Though crude oil prices traded on the New York Mercantile Exchange spiked a hefty US$1.42, or 3% to US$48.51 per barrel due to a weaker US dollar and lower count of oil rigs, it was not helping the local bourse this time round.
In addition, stock markets in the AsiaPacific region were mixed to marginally easier in cautious mood while investors stayed on the sidelines searching for new clues.
Given the dearth of incentives on the horizon, blue chips, together with most second and lower liners, skidded, pulling the key index down 4.60 points to 1,771.62 in lacklustre trading.
While losses were somewhat small, the index’s closing at the day’s lowest level on Monday was seen as a negative development on the technical perspective, which usually will open the windows for more declines the following day.
Indeed, the local market bourse opened a shade below the flat line, easing 0.15 of a point to 1,771.47 the next day, but that was not the story, as institutional players soon emerged from the sidelines, taking comfort of a firmer US equities, to seek value buys.
Wall Street showed signs of stabilising after suffering two days of steep fall, with the Dow rebounding a small 29.24 points to 21,703.75 in overnight session, simply because lingering tensions between the United States and North Korea, and weakness in energy shares capped the upside potential.
A steadier regional trend also aided the local sentiment but gains were limited ahead of a Federal Reserve meeting later of the week kept investors on edge.
In line with the tentative global performance, Bursa Malaysia drifted sideways, but with a slight upward bias to settle up 2.60 points to 1,774.22 on Tuesday.
The bulls on Wall Street bounced back on aggressive buying in the technology issues, as US lawmakers’ comments on tax reform and the debt ceiling boosted risks appetite and crude oil prices inched up on news about another crude stockpile drawdown in the United States.
In an unprecedented move, Asian stocks turned mixed ahead of a key central bankers meeting. Taking the cue from the regional peers, Bursa Malaysia tripped into consolidation mode, which saw the key index trending downward on a slow pace after opening up 1.13 points to 1,775.35 to finish down 1.28 points to 1,772.94 in sluggish session in mid-week.
Thereafter, trading on the local bourse was subdued on lack of fresh catalyst, with the Dow pulling back moderately owing to an apparent bout of profit-taking selling in overnight trading, weighing on the local sentiment.
That was the pattern from morning until the late hours, where a fresh bout of buying in select big-cap counters propelled the key index up 2.56 points to 1,775.50 at the final bell on Thursday.
And yesterday, the local bourse retraced 6.33 points to 1,769.17 on correction, as investors adopted a cautious stance while awaiting the outcome and speeches by the heads of the US and European central banks at a meeting in Jakson Hole, Wyoming.
Statistics: On a Friday-to-Friday basis, the major index dropped 7.05 points, or 0.4% to 1,769.17 yesterday, versus 1,776.22 on August 18.
Total turnover for the week was 9.595 billion units worth RM9.549bil, against 8.302 billion shares amounted to RM8.748bil done previously.
Outlook: The local bourse slipped back into correction mode, with the FBM KLCI drifting sideways to marginally lower the past week owing to an apparent profit-taking activity. Other issues such as turmoil in the White House, growing doubts about president Donald Trump’s ability to fulfil his economic agenda, as well as prevailing geopotical tensions continued to erode risk sentiment.
And with the deadline looming for the United States to raise the debt ceiling or risk defaulting on debt payments, trading on Bursa Malaysia is likely to remain subdued and lacklustre in the week ahead due to limited participation, simply because no one would rush in to buy in times of uncertainty.
Based on the daily chart, the key index had violated the the 100-day simple moving average (SMA) of 1,766 points slightly during intra-day session yesterday.
Although tentative for now, theoretically, a crack of this fairly important line raise the prospects of a re-test of the 1,750 points concrete floor, of which a clear breakdown may see the lowest 100-day SMA of 1,720 becoming vulnerable and the 1,700 points psychological level in great danger.
Technically, most of the short-term indicators, especially the daily and weekly moving average convergence/divergence histograms are frail, suggesting the local bourse may trade lower on extended correction process, unless fresh catalyst emerges.
To the upside, the FBM KLCI is anticipated to face stiff resistance at the 1,800 points barrier, of which a positive breakout will see the bulls turning more aggressive on broadbased buying momentum.