Major breakout remains elusive
Against the mixed Wall Street backdrop the previous Friday, shares on Bursa Malaysia started out the week slightly steadier, with the FBM Kuala Lumpur Composite Index (FBM KLCI) gaining 0.37 of a point to 1,780.27, rebounding from the previous session’s losses.
Blue chips led the way and drove the market higher during the day, as the big boys took advantage of the stronger ringgit against the greenback to seek bargain buys.
Elsewhere, most second and lower liners also rose on greater retail participation, as a firmer performance in the Asia-Pacific boosted investor’ confidence, underpinned further by easing geopolitical tensions in the Korean Peninsula.
However, gains were small, with the key index finishing up 2.84 points to 1,782.74, as there was still caution on Monday, with a steep fall in crude oil prices weighing on the local sentiment.
After a short breather, the bulls on Wall Street bounced back to life, propelling the Dow up sharply to above the 22,000-point mark, led by Florida-based company on news that Hurricane Irma had weakened to a tropical storm and that anniversary celebrations in North Korea passed without new provocations.
Meanwhile, crude oil prices recovered, advancing 59 US cents to US$48.07 a barrel after key US refineries resumed operations.
As expected, Asian equities joined the overnight US rally, with the MSCI broadest index of Asia-Pacific spiking 0.1% to the highest level in a decade the next day, as investors breathed a sigh of relief that Irma caused minor damage and North Korean fears eased.
Tracking the global equities rally, the local bourse steadied on greater risks appetite while confidence returned to the marketplace. A stronger ringgit against the US dollar added to the upbeat mood.
Consequently, the FBM KLCI added 7.12 points to settle at 1,789.86 on Tuesday, also the day’s highest level in robust volumes, thus carving out a bullish note on the daily chart. Theoretically, Bursa Malaysia was expected to extend the upward thrust the following day and with overnight Wall Street’s three major indices – the S&P 500share, the Dow and the Nasdaq setting records, as well as a dearer crude oil prices, there was no apparent reason for the local market not to perform accordingly.
But that was not the case, as a fresh bout of profit-taking selling hit the region, and Bursa Malaysia was no exception, as jittery investors were worried tensions in the Korean peninsula may flare up after US President Donald Trump said that United Nations sanctions on North Korea were a “very small step” and “nothing compared to what ultimately will have to happen” to deal with the country’s nuclear programme while North Korea remained defiant over the latest sanctions and wowed to fight on.
Though trading was somewhat lacklustre, the pullback on the local front was shallow, with the key index declining 3.79 points to 1,786.07 in mid-week.
Thereafter, the local bourse generally tracked the uninspiring regional trend shedding 4.7 points to 1,781.37 on Thursday, but went up 4.96 points to 1,786.33 amid late bargain hunting buying momentum yesterday, shrugging off North Korea’s ballistic missile launch that dented risk appetite earlier.
Statistics: Week-on-week, the benchmark index advanced 6.43 points, or 0.4% to 1,786.33 yesterday, compared with 1,779.90 on Sept 8.
Total turnover for the regular week amounted to 13.126 billion shares valued at RM10.766bil, versus 10.339 billion units worth RM8.664bil changed hands during the four-day holiday-shortened previous week.
Outlook: Bursa Malaysia was in consolidation mode, with the FBM KLCI ending little changed on the upside week-on-week basis.
Despite the steadier finish, the overall market sentiment has weakened due to profit-taking liquidation, exacerbated by fresh geopolitical tension in the Korean Peninsula after North Korean fired a missile over Japan into the Pacific Ocean yesterday.
This is not the first missile North Korea had fired over Japan and certainly, it wont be the last.
Hence, geopolitical tensions is likely to prevail in the short-term, but investors should not over-react and perhaps, take the opportunity to accumulate more on dips, as markets in the region had on numerous occasions proven that equities would stabilised a few days later, each time after North Korean launched a missile.
Based on the daily chart, the local bourse appeared trapped since peaking out temporarily at 1,796.75 on June 16 and very likely, it will remain stuck in the immediate term, as a major breakout is elusive, at least for now, in the absence of strong catalyst.
A crack of the lower rectangular box of 1,750 points will have a negative impact on the market outlook going forward while a decisive positive breakout of the upper horizontal line of 1,800 points psychological barrier will see the underlying tone of the market turning more bullish.
Technically, the daily slow-stochastic and the 14-day relative strength index are falling while the moving average convergence/ divergence histogram weakening, implying the key index will probably retreat this week, unless new lead emerges.