Ma­jor break­out re­mains elu­sive

The Star Malaysia - StarBiz - - Market Watch - K.M. LEE star­biz@thes­tar.com.my

RE­VIEW:

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.

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