bound seen from oversold levels
REVIEW: The return of Chinese markets from their Golden Week holiday spurred some volume relative to the previous week, but investors were looking forward to the weekend for crucial decisions by both domestic and foreign policymakers.
Apart from the tabling of Budget 2020, also to be announced yesterday was the outcome of the latest Us-china trade talks, which at press time, looked unlikely to yield significant results despite a scheduled meeting between US President Donald Trump and China’s top trade negotiator, Vice-premier Liu He.
Certain sectors, such as construction, were seen reacting positively in the days leading up to the budget announcement.
The index made its biggest move of the week on Tuesday, where it gapped up at the opening bell and put on 2% by day’s close.
The positioning in construction stocks was not a big surprise as investors speculated the government would revive some mega-infrastructure projects that had previously been caught in limbo.
There was also notable movement in the semiconductor sector at the start of the week when stocks jumped following news that Apple was ramping up production of its iphone 11.
The Bursa Malaysia technology index has been on a tear with a positive trend line extending steeply since August this year but on Monday, there was significant incline as the index gapped up at the open to affirm the uptrend.
The rally would hit a peak on Tuesday and resume a descent in the latter half of the week as profit-taking set in after the notable gains.
Over the course of the week, the flighty mood of foreign investors kept the FBM KLCI on a bearish footing.
Case in point was the market bucking the regional trend on Thursday by drifting lower despite other Asian markets rallying on China’s better-than-expected spending data during its week-long national holidays.
While this could be put down to prebudget nerves, the trade war remained a dominant catalyst in trading activity, a fact that became clearer as the clock ticked closer to the outcome of the Us-china trade talks.
Some dramatic moves by the US administration in the lead up to the talks created trading volatility.
On Tuesday night, all three major US indices dove below their respective 50-day simple moving average, which had served as a key support over the last one-month period.
Amid the growing pressure, the key support on the FBM KLCI 1,550 held tight, serving as a platform for the index to bounce higher. By Wednesday’s close, it was down 7.56 points to 1,551.23.
Later that evening, a news report that deputy-level talks had fallen through and the Chinese were ready to cut short their meeting in Washington, triggered a plunge in US stock futures in after-hours trading.
The Thursday market was bearish but the FBM KLCI remained resilient despite brief dips below the support.
The index ended virtually unchanged at 1,551.87.
Yesterday, Bursa Malaysia rallied ahead of the budget with the best performing sectors being construction and technology.
The gains on the FBM KLCI were slight – it ended 4.97 points higher at 1,556.84 – although the build-up in momentum was evident in the technical indicators, suggesting improvement in sentiment.
Following the tabling of Budget 2020, fresh buying catalyst are expected to come on to the market.
However, as at press time, the Us-china trade talks were ongoing, leaving an as yet unknown factor on the table for Monday’s trading session.
Statistics: The major index ended the week 0.83 points or 0.1% lower over the previous week, at 1,556.84.
Total turnover for the trading week stood at 10.95 billion shares amounting to Rm7.85bil compared with 9.73 billion shares worth Rm7.27bil over the previous week.
Outlook: The FBM KLCI showed indications of a strong rebound on Friday with the technical indexes rising from oversold levels and the benchmark halting its decline.
With this latest development, it appears that the support of 1,550 points remains intact as investors return to a buying mood.
Despite the short-term upsides, the daily moving average convergence/divergence line remains weak below the signal line and in negative territory, suggesting that a positive trend has yet to take hold.
Indeed, the index remains trading below all its key simple moving averages (SMA). In the event of further gains over the coming sessions, the index will face downward pressure from the bottom-most 14-day SMA and encounter its first resistance at 1,570.
A return to bullish sentiment lies in a convincing breach of the 50-day SMA, which would result in a successful crossing of the 1, 600 level.
The 1,550-mark remains the share’s immediate support while 1,530 serves as next support.