New Straits Times - - BUSINESS -

THE lo­cal blue-chip bench­mark FTSE Bursa Malaysia KLCI (FBM KLCI) re­cov­ered last week en­cour­aged by the more up­beat ex­ter­nal tone, after the United States cen­tral bank chief cued for a pause in fur­ther rais­ing in­ter­est rates.

Cau­tious op­ti­mism fol­low­ing con­clu­sion of the US-China trade talks in Bei­jing, firmer ring­git and oil price trend fu­elled buy­ing mo­men­tum in lower lin­ers and small caps as re­tail par­tic­i­pa­tion in­creased sub­stan­tially, specif­i­cally in the tech­nol­ogy and oil and gas sec­tors.

For the week, the FBM KLCI was up 13.44 points, or 0.8 per cent, at 1,683.22, as losses in Har­talega Hold­ings Bhd (-RM1.07), Top Glove Bhd (-68 sen) and Petronas Chem­i­cals Group Bhd (56 sen) were off­set by gains in Gent­ing Bhd (+52 sen), Te­naga Na­sional Bhd (+40 sen), Sime Darby Bhd (+30 sen), IHH Health­care Bhd (+29 sen) and Gent­ing Malaysia Bhd (+23 sen).

Av­er­age daily traded vol­ume and value last week im­proved sig­nif­i­cantly to 2.83 bil­lion shares worth RM2.26 bil­lion, com­pared with 1.8 bil­lion shares and RM1.2 bil­lion, re­spec­tively, the pre­vi­ous week, mostly due to the sub­stan­tial in­crease of trad­ing par­tic­i­pa­tion in lower-priced sec­ond lin­ers and small-cap stocks.

Im­prove­ment in ex­ter­nal news flows, stronger crude oil price and a weaker US dol­lar led to the strength in the ring­git that con­vinced for­eign in­vestors to turn net buy­ers in the last three work­ing days of last week, after ex­it­ing the lo­cal scene in a big way last year.

While last week’s re­cov­ery in the bench­mark in­dex im­plied healthy un­der­cur­rents to drive a po­ten­tial pre-Chi­nese New Year rally, blue chips could con­gest side­ways early this week while small cap and lower lin­ers en­joy ro­ta­tional plays as in­vestor sen­ti­ment could turn frag­ile again ahead of a vote in British par­lia­ment over Brexit agree­ment to­mor­row.

Brexit aside, the weak US De­cem­ber in­fla­tion data and the pro­longed gov­ern­ment shut­down over wall fund­ing stale­mate should con­tinue to un­der­mine a re­cov­ery in the US dol­lar.

Tech­ni­cal Out­look

Bursa Malaysia shares rose on Mon­day, lifted by the pre­vi­ous Fri­day’s strong rally in the US. The FBM KLCI climbed 9.39 points to close at 1,679.17, off an early high of 1,687.13 and low of 1,673.03 as gain­ers led losers 604 to 294 on ro­bust turnover of 2.5 bil­lion shares worth RM1.92 bil­lion.

Stocks closed lower the next day on profit-tak­ing. The FBM KLCI fell 6.41 points to 1,672.76, off an early high of 1,686.37 and low of 1,670.67 as losers edged gain­ers 404 to 366 on to­tal trade of 2.31 bil­lion shares worth RM2.03 bil­lion.

While blue chips ended lower on Wed­nes­day, lower lin­ers and small caps at­tracted bar­gain hunters. The FBM KLCI slipped 4.93 points to close at the day’s low of 1,667.83, off an ear­lier high of 1,684.08, but gain­ers led losers 678 to 258 on ro­bust turnover of 3.02 bil­lion shares worth RM2.51 bil­lion.

Lo­cal fund sup­port aided the FBM KLCI to close firm the fol­low­ing day. The in­dex climbed 11.05 points to set­tle at 1,678.88, off an early high of 1,681.23 and low of 1,669.28 as gain­ers matched losers at 435 on very strong to­tal turnover of 3.45 bil­lion shares worth RM2.66 bil­lion.

Sen­ti­ment im­proved fur­ther on Fri­day, largely aided by the more up­beat ex­ter­nal tone, firmer ring­git and oil price trend. The in­dex added 4.34 points to end the week at 1,683.22, after mov­ing be­tween an open­ing high of 1,684.99 and low of 1,676.75 as gain­ers led losers 569 to 294 on to­tal turnover of 2.89 bil­lion shares worth RM2.17 bil­lion.

Trad­ing range for the blue-chip bench­mark in­dex shrank to 19.3 points last week, com­pared with the 35.03-point range the pre­vi­ous week, after profit-tak­ing on rub­ber glove mak­ers re­stricted up­side on the in­dex. For the week, the FBM Emas In­dex rose 205.01 points, or 1.8 per cent, to 11,618.03, while the FBM Small Cap In­dex surged 771.1 points to 12,104.83, with strong buy­ing mo­men­tum in small caps fu­elling ral­lies.

On tech­ni­cal mo­men­tum in­di­ca­tors for the FBM KLCI, the daily slow stochas­tics has eased into the neu­tral zone and is hook­ing up due to the late-week re­cov­ery, while the weekly in­di­ca­tor’s sig­nal line re­sumed higher to strengthen its up­ward mo­men­tum.

The 14-day Rel­a­tive Strength In­dex (RSI) in­di­ca­tor im­proved to a pos­i­tive read­ing of 52.19, while the 14-week RSI in­di­ca­tor hooked back up to a stronger read­ing of 41.00.

As for trend in­di­ca­tors, the daily Mov­ing Av­er­age Con­ver­gence Di­ver­gence (MACD) sig­nal line also turned higher to sup­port a hook-up on the weekly MACD’s trig­ger line, im­ply­ing a re­turn of bullish mo­men­tum.

In the mean­time, the -DI and +DI lines on the 14-day Di­rec­tional Move­ment In­dex (DMI) trend in­di­ca­tor whip­sawed on a fall­ing ADX line, sug­gest­ing the ab­sence of a def­i­nite trend.


The lo­cal bench­mark in­dex should pause for con­sol­i­da­tion this week fol­low­ing re­cov­ery on tech­ni­cal mo­men­tum in­di­ca­tors after last week’s choppy ses­sions, but the more pos­i­tive ex­ter­nal sen­ti­ment from cues that the US cen­tral bank may stall rais­ing in­ter­est rates and even re­verse its bal­ance-sheet re­duc­tion plan, if global eco­nomic growth fal­ters should pro­vide a boost.

The po­ten­tial for a deal after the re­cent con­clu­sion of mid-level US-China trade talks and re­cov­ery in global oil prices and ring­git should also sup­port fur­ther re­cov­ery, with the lower lin­ers and small caps space show­ing re­newed up­side vigour.

On the in­dex, it re­quires a con­vinc­ing breach above im­me­di­ate re­sis­tance from the 1,700 psy­cho­log­i­cal level to fuel up­side mo­men­tum to­wards sub­se­quent re­sis­tance from 1,722, 1,742 and 1,762, the re­spec­tive 61.8 per cent Fi­bonacci Re­trace­ment (FR), 50 per cent FR and 38.2 per cent FR of the rise, from 1,657 low on June 28 to the 1,826.9 high of Au­gust 28. Im­me­di­ate sup­port stays at the June last year’s low of 1,657, with cru­cial sup­ports still at the De­cem­ber 18 low of 1,626, fol­lowed by 1,617, the 123.6 per cent (Fi­bonacci Pro­jec­tion) FP level, and 1,593, the 138.2 per cent FP.

Im­prove­ment in ex­ter­nal news flows, stronger crude oil price and a weaker US dol­lar led to the strength in ring­git that con­vinced for­eign in­vestors to turn net buy­ers in the last three work­ing days of last week.

The sub­ject ex­pressed above is based purely on tech­ni­cal anal­y­sis and opin­ions of the writer. It is not a so­lic­i­ta­tion to buy or sell.

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