Lo­cal stock in­dex at nine-month low

FBM KLCI re­mains bi­ased to­wards down­side

The Star Malaysia - StarBiz - - News - By YVONNE TAN yvonne@thes­tar.com.my

PE­TAL­ING JAYA: An at­tempt by the FBM KLCI to sur­pass its year’s peak has re­sulted in­stead in a bout of per­sis­tent sell­ing, pulling the bench­mark in­dex down close to a cur­rent nine-month low.

At yes­ter­day’s close, the 30-stock gauge fin­ished 0.32% lower at 1,714.42 points, mak­ing it pos­si­bly one of the re­gion’s worst per­form­ers in a year, which has seen peers like the In­done­sian and Philip­pines’ stock mar­kets scal­ing to record highs.

In Septem­ber, the FBM KLCI had tried to pen­e­trate its peak of 1,796 cre­ated in June, but was un­suc­cess­ful largely due to a lack of buy­ing in­ter­est. “It’s al­most al­ways like that. When the in­dex tries to over­come its pre­vi­ous peak and when that doesn’t hap­pen, it will trig­ger per­sis­tent sell­ing,” a se­nior tech­ni­cal an­a­lyst said.

An­a­lysts agreed that while the re­cent strong eco­nomic num­bers are pos­i­tive, a loom­ing gen­eral elec­tion and un­cer­tain­ties sur­round­ing that are putting pres­sure on the lo­cal mar­ket.

In a note yes­ter­day, Ke­nanga Re­search said the over­all tech­ni­cal out­look of the FBM KLCI “re­mains bi­ased to­wards the down­side at the cur­rent junc­ture”.

Key sim­ple mov­ing av­er­ages, a mar­ket in­di­ca­tor, are cur­rently in a “death-cross” state, while other key in­di­ca­tors con­tinue to re­main “di­rec­tion­less”, the re­search out­fit told clients.

In sim­ple English, a “death-cross” means mar­ket mo­men­tum tak­ing a wrong di­rec­tion.

Ke­nanga pointed out that ever since break­ing be­low the pre­vi­ous sup­port of 1,727 last week, the in­dex has been trad­ing within a thin 10-point range on sub­dued vol­umes.

“From here, fur­ther weak­ness could see the in­dex break­ing be­low the im­me­di­ate sup­port at 1,714, po­ten­tially ca­pit­u­lat­ing to­wards the psy­cho­log­i­cal bar­rier at 1,700.

“Con­versely, should the mar­ket im­prove, up­side re­sis­tance can be found at 1,734 and 1,750,” it said.

Danny Wong, fund man­ager and CEO at Areca Cap­i­tal, feels that in­vestors, par­tic­u­larly for­eign­ers, will mostly stay away from the lo­cal mar­ket un­til there is some clar­ity on the GE front.

“This, un­less there is an up­grade on spe­cific stocks fol­low­ing stel­lar cor­po­rate earn­ings, if any,” he said.

Hav­ing said that, Wong, who man­ages about RM700mil in client money, added that he feels that the small-to-mid caps which have per­formed gen­er­ally well this year in terms of earn­ings would con­tinue to at­tract in­ter­est.

“I be­lieve the lo­cal funds will con­tinue to sup­port and in­vest in th­ese smaller com­pa­nies and there is more room for them to grow,” he said. From a macroe­co­nomic per­spec­tive, Malaysia has done gen­er­ally well in re­cent times, re­port­ing ear­lier this month a third-quar­ter gross do­mes­tic prod­uct fig­ure that ex­ceeded most ex­pec­ta­tions.

At 6.2%, the lo­cal econ­omy ex­panded at its fastest pace in three years. Still, a clear dis­con­nect be­tween such a ro­bust num­ber and what is felt by the man on the street ex­ists, based on lat­est Malaysian con­sumer sen­ti­ment fig­ures, which in­di­cated that sen­ti­ment con­tin­ues to be be­low the op­ti­mism thresh­old.

Mean­while, across the broader mar­ket yes­ter­day, a to­tal of 613 coun­ters ended lower, 286 traded higher while 370 fin­ished flat.

Fol­low­ing its re­cent lack­lus­tre per­for­mance, the FBM KLCI is ex­pected to re­main pres­sured to­wards the sup­port of 1,700 points, JF Apex Se­cu­ri­ties said.

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