Rally hits speed bump
REVIEW: Trading on Bursa Malaysia took on a frenetic pace over the past week with a record daily trading volume of 11.21 billion shares recorded on Monday as investors flocked to equities in an an attempt to catch a rally.
Trading in a highly speculative environment, investors picked up on thematic plays in the market in response to news flow over the Covid-19 situation.
Oil and gas as well as glove maker counters have been the focus of attention since the onset of the coronavirus – the first to capitalise on the volatile price movement of crude and the second to cash in on the huge earnings pipeline secured by glove manufacturers in light of strong demand.
On Monday, the daily trading volume surged past the previous record of Rm9.56bil to top Rm11bil in tandem with a healthy trading value of Rm4.4bil. The top traded stocks were prolific names including Icon Offshore, which alone saw nearly seven million shares exchanging hands, Velesto, Bumi Armada, KNM, Hibiscus Petroleum and Sapura Energy.
The intensity of trading was triggered by reports of a successful early-stage trial of a coronavirus vaccine in the US.
The discovery and successful roll-out of a vaccine could hasten the re-opening of global economies and eliminate fears of the spread of a “second wave” of the disease.
On high hopes, the FBM KLCI was seen extending its lead over the 1,400-point level.
Starting Monday, the index put on healthy gains over four straight days to establish a firm footing above the 1,430 level. By Thursday, the index had made a tentative crossing of the 1,450 level.
While a negative report over the Moderna Inc vaccine trial tempered sentiment, it only served to swing investor attention back to medical stocks, giving yet another boost to glove makers and healthcare plays IHH and Pharmaniaga.
Among the index heavyweights, earnings results had begun streaming in. The first quarter performances were mixed, leading to jumps in Maybank and the Petronas counters while Axiata and Public Bank slipped on their results and the Genting counters were subdued.
Global equities and crude oil prices were further invigorated on Thursday as world governments continued to pledge support for their economies amid moves to ease economic lockdowns. A new level of confidence seemed to have overtaken markets at this point as investors looked forward to a gradual return to business-as-usual.
However, China served to break up the momentum as it proposed a new national security law for Hong Kong, which promised to resume the civil unrest seen in the island city last year. The FBM KLCI ended yesterday 15.35 points lower at 1,436.76.
Statistics: The major index ended the week 33.32 points, or 2.4%, higher over the previous Friday at 1, 436.76. Total turnover for the week stood at 41.3 billion shares amounting to Rm21.54bil compared with 32.2 billion shares worth Rm16.74bil in the previous four-day trading week.
Outlook: After a seven-day rally, it seems the market is ready to take a break, triggered by the onset of negative news flow on Us-china relations. On the technical charts, the FBM KLCI has made significant headway following its breach of the 1,430 resistance. However, its crossing of 1,450 was fleeting, as it faced resistance from the 100-day simple moving average and turned lower.
Given the falling momentum on the technical indicators after having hit overbought conditions, a consolidation phase is setting in, leaving the index likely to move in the 1,430-1,450 range.
A crossing of 1,460 would see the stock revive another leg of the short term uptrend, while to the lower end, support is found at 1,400 and 1,370.