Momentum picks up for the year-end
REVIEW: It has been a volatile week for Bursa Malaysia, although the swings in opposite directions also meant traders had windows of opportunities in the run-up to the holiday season.
Headlining the global agenda was the midweek passing of the US tax reform bill, which was seen as a possible game-changer for next year’s US corporate earnings and economic outlook.
To some degree, however, Malaysian traders seemed to forego the political speculation that was dominating the US markets.
Instead, the local market was tuned in to the year-end rally triggered by the annual window-dressing period, which saw active trading on the FBM KLCI this past week.
In currencies, there was some concern over the fate of the ringgit in the days leading up to and following the passing of the US tax reform bill.
However, perhaps buffeted by conflicting views over how the US tax reforms and possible interest rate hikes – both by Bank Negara and the US Federal Reserve – would affect currencies, investors seemed inclined to wait out the remainder of the year on the sidelines with little fluctuation in the exchange over the course of the week.
On Monday, the domestic market had started the week relatively stable after the previous week’s close above the key 1,750 level. The market attempted to hold on to gains, with investors still taking some buying opportunities before an imminent correction. By market close, it was slightly lower at 1,751.64 points
However, it was Tuesday’s performance that saw money taken off the table, with foreign investors turning net sellers to the tune of RM143.9mil or about 5% of the day’s turnover value.
The local index sank rapidly in the morning session and broke through the 1,750 support by midday. By market close, it was trading at 1,736.95 points.
The sharp fall saw the technical indicators neutralising their overbought conditions, paving the way for a technical rebound.
Late that evening, US Congress passed the long-debated tax reform bill, nothwithstanding a technicality that saw the voting stretch on to Wednesday.
But rather than have the expected effect of rallying markets, US indexes came off their highs, suggesting that the widely expected positive catalyst to earnings had already been priced into equities.
While this resulted in lacklustre and mixed performances among Asian markets on Wednesday morning, the FBM KLCI was moving along its own track and eyeing a return to upwards momentum.
Bursa surged forward, led by financial stocks and latex glove manufacturers that had claimed the limelight.
Top Glove once again proved to be the darling of the equity market by posting strong earnings growth, and led other glove manufacturers forward on sector confidence.
Malaysia’s consumer price index was also announced on Wednesday – a 3.4% year-onyear gain – which gave some expectation of an interest rate hike in January, resulting in the ringgit edging slightly higher.
Despite nearly 10 points up, the FBM KLCI couldn’t float above the 1,750 level and ended under, at 1,746.63 points.
Investors took the local bourse to a second straight day of gains on Thursday, which was a welcome relief for observers hoping for the index to end the year on a high note. While profit-taking was seen across the financial counters, CIMB stood out for its rise into the ranks of the top three gainers.
Once again, the KLCI peeped out above the 1,750 level at 1,751.21 points, but with a negative market breadth that suggested the market was losing some momentum.
On Friday, despite thin trading volumes ahead of the Christmas holiday, the market was determined the end the week on a high note, surging in the final minutes of trade to 1,760.24 points.
Statistics: On-week, the major index was up 7.17 points or 0.4% to 1,760.24 yesterday, versus 1,753.07 on Dec 15. Total turnover for the regular week stood at 12.227 billion shares amounting to RM10.942bil, compared with 11.074 billion shares valued at RM13.647bil exchanging hands the previous week.
Outlook: The year-end rally has somewhat overcome concerns over next year’s general election and pushed the market back into a higher trading range.
Although investors could be seen cashing in on gains during the week and trading volumes are expected to thin out moving into the holiday period, the positive weekly result indicates that there remains holding power in the market.
It’s now left to the Christmas-shortened week to see if the market can meet more optimistic forecasts and rise to 1,800 points or higher by year-end.
As at Friday’s close, the market is in need of another decisive push before it can come within striking distance of that target.
It is heartening to note that despite fears of US interest rate hikes and the resumption of greenback strength that the ringgit continues to hold steady. This suggests confidence in the local currency, and the underlying economic outlook for 2018.
The technical indicators maintain an uptrend for the local bourse.
The support remains at 1,750 level, while the next support lies at 1,730. To the upside, immediate resistance sits at 1,765 while the next target rests at 1,800.