In­dex tread­ing on un­safe area

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

RE­VIEW: The FBM KLCI fin­ished the pre­vi­ous Fri­day’s ses­sion at the day’s high­est level to carve out a pos­i­tive sig­nal, thus set­ting the stage for a stead­ier open­ing for the week.

How­ever, it could not live up to in­vestors’ ex­pec­ta­tion, start­ing out 0.35 of a point below the flat line at 1,763.65 due to lack of pos­i­tive cat­a­lyst on the hori­zon, with the overnight Wall Street end­ing lit­tle changed on the neg­a­tive side and crude oil prices suf­fer­ing a sharp fall.

Though US leads were less favourable, a spike in Chi­nese eq­ui­ties on re­sump­tion of busi­ness af­ter a week-long break and a stead­ier per­for­mance in other Asian mar­kets helped soothe the lo­cal boys.

A re­bound in the ring­git against the green­back also pro­vided sup­port to some ex­tent and kept Bursa Malaysia within a very tight 3.22-point band through­out.

Pend­ing a clearer pic­ture to emerge, the key in­dex see-sawed to end al­most flat, up 0.03 of a point to 1,764.03 in a slug­gish ses­sion on Mon­day.

Overnight Dow Jones pulled fur­ther away from the record highs the fol­low­ing day as a slide in health­care is­sues off­set gains in tech­nol­ogy stocks while crude oil prices drifted up 29 cents to US$49.58 a bar­rel af­ter the Or­gan­i­sa­tion of the Petroleum Ex­port­ing Coun­tries’ (Opec) sec­re­tary-gen­eral hinted on fur­ther cuts in pro­duc­tion.

De­spite the mixed pic­togram from the US, most stock mar­kets in the Asia-Pa­cific re­gion rose on bar­gain hunt­ing, but ad­vances were small as most in­vestors adopted a cau­tious stance, with wor­ries over a pos­si­ble North Korea mis­sile launch weigh­ing on the mar­kets.

In the ab­sence of any clear di­rec­tion from the off­shore peers, blue chips con­tin­ued to flirt within a nar­row range, but with a down­ward bias, tak­ing the cue from the softer overnight per­for­mance of Wall Street.

In stark con­trast, most sec­ond and lower lin­ers firmed on greater re­tail par­tic­i­pa­tion search­ing for short-term gains.

At the fi­nal bell, the FBM KLCI lost 2.90 points to 1,761.13, but the mixed tone of the broader mar­ket was clearly painted on the score­board, with win­ners, losers and flat coun­ters nearly evenly matched on Tues­day.

Af­ter a short breather, the bulls on Wall Street re­sumed the rally, push­ing the closely-watched Dow to a new record, led by Wal­Mart Stores while in­vestors fo­cused on up­com­ing quar­terly re­ports.

At the com­mod­ity ex­change, crude oil prices jumped al­most 3% to US$50.92 a bar­rel, boosted by Saudi Ara­bian ex­port cuts in Novem­ber.

As ex­pected, most ma­jor mar­kets in the re­gion stead­ied on ex­tended buy­ing mo­men­tum. How­ever Bursa Malaysia went the op­po­site route, as blue chips strug­gled due to liq­ui­da­tion pres­sure by for­eign funds.

While de­clines in the qual­ity is­sues dragged the key in­dex down 3.92 points to 1,759.21, gains in cheaper is­sues kept the un­der­ly­ing tone of the mar­ket mixed in mid­week.

There­after, per­sis­tent profit-tak­ing sell­ing al­ter­nated with spo­radic bar­gain hunt­ing in­ter­est dom­i­nated the floor although over­seas mar­kets were do­ing fairly well and losses in the heavy­weights sent the FBM KLCI down 3.21 points to 1,754 on Thurs­day.

In another slug­gish ses­sion, the lo­cal bourse fluc­tu­ated be­tween an intra-day high of 1,756.17 in the morn­ing to a low of 1,751.62 in the af­ter­noon be­fore bounc­ing off to set­tle at 1,755.32, up 1.32 points yes­ter­day.

Statis­tics: For the week, the ma­jor in­dex lost 8.68 points, or 0.5% to 1,755.32 yes­ter­day, against 1,764 on Oct 6.

Weekly turnover stood at 16.332 bil­lion shares amounted to RM10.052bil, com­pared with 12.291 bil­lion units worth RM9.66bil done the prior week.

Out­look: Bursa Malaysia was in cor­rec­tion mode the past week as the FBM KLCI’s fu­tile at­tempt to close above the im­me­di­ate 14-day sim­ple mov­ing av­er­age (SMA) on Mon­day trig­gered a bout of re­newed sell­ing pres­sure.

Ob­vi­ously, it was a big let­down. While the bullish over­seas peers con­tin­ued to rally amid op­ti­mism about brisk global growth, the lo­cal bourse bucked the pos­i­tive trend, trad­ing lack­lus­trely.

Mov­ing for­ward, cau­tious mood is likely to pre­vail while per­sis­tent out­flow of funds, mak­ing their way back to the de­vel­oped coun­try on ex­pec­ta­tion of a rate hike be­fore the end of the year, hits Bursa Malaysia.

Based on the daily chart, the FBM KLCI is now tread­ing at an un­safe area fol­low­ing the re­cent weak­ness and should liq­ui­da­tion per­sists, it is just a mat­ter of time the lo­cal bourse goes un­der­wa­ter.

Tech­ni­cally, in­di­ca­tors are not look­ing very good.

In fact, the re­sump­tion of a neg­a­tive ex­pan­sion on the daily mov­ing av­er­age con­ver­gence/di­ver­gence (MACD) his­togram against the daily sig­nal line and the steady down­trend on the weekly MACD sug­gest Bursa Malaysia may be un­der pres­sure, with the FBM KLCI in dan­ger of break­ing down this week, un­less fresh buy­ing in­ter­est comes to the res­cue.

A crack of the 1,750-point floor, fol­lowed by a clear vi­o­la­tion of the low­est 200-day SMA, ly­ing at the vicin­ity of 1,741 points, will have a neg­a­tive im­pact on the out­look go­ing for­ward.

To the up­side, the key in­dex will face re­sis­tance at 1,770 points and strong chal­lenges at 1,800 points.

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