NewStraitsTimes . MONDAY, NOVEMBER 11, 2019 | BUSINESS 18 BURSA MALAYSIA T HE FTSE Bursa Malaysia KLCI (FBM KLCI) extended gains to a fresh two-month high last week, encouraged by improving external sentiment after strong jobs growth last month fuelled a rally on United States stocks to record highs. For the week, the FBM KLCI added 1.03 per cent to 1,609.73, with gains on Maybank (+23 sen), CIMB (+14 sen), Genting Bhd (+34 sen) and Petronas Chemicals (+17 sen) offsetting losses in Hong Leong Bank (-24 sen) and IHH Healthcare (-11 sen). The average daily traded volume and value was 2.72 billion shares and RM1.97 billion last week, compared with the 2.58 billion shares and RM1.99 billion average the previous week. President Donald Trump’s statement last Friday that he had not agreed to roll back tariffs on China should dent recent rally contributed by trade optimism. A “wait and see” attitude for taking fresh positions could also prevail as investors await Malaysia’s third-quarter (Q3) gross domestic product (GDP) announcement this Friday. However, profit-taking pressures this week could be buffered by investors’ appetite on undervalued banking stocks, such as RHB Bank, AMMB, Alliance Bank and Affin Bank, after Bank Negara Malaysia lowered the statutory reserve requirement (SRR) ratio from 3.5 per cent to three per cent effective Saturday. The reduction will inject RM7.4 billion into the financial system. Banks can utilise this new-found cash to increase their lending selectively to improve loan growth and profits. Loans grew by only 0.5 per cent month-on-month in September, softer than a growth of 0.6 per cent month-on-month in August, and 3.8 per cent year-on-year. Meanwhile, loan applications have contracted by 6.1 per cent year-on-year and 16.0 per cent month-on-month in September. Malaysia’s third quarter GDP that will be released this Friday could shed some light on the economy, which has witnessed the negative impact caused by US-China trade war on exports. In the first nine months, overall exports declined by 1.1 per cent year-on-year to RM728.5 billion but greater contraction of 3.3 per cent to RM627.7 billion in imports contributed to a higher trade surplus of RM100.9 billion to date, versus RM87.5 billion in the same period last year. Weakness in exports is expected daily signal with a strong ascent above the mid-point. On trend indicators, the daily Moving Average Convergence Divergence (MACD) is gaining strength to reinforce this uptrend, while the weekly MACD flashed a fresh buy signal. On the 14-day Directional Movement Index (DMI) trend indicator, the +DI and –Di lines expanded following the previous week’s buy signal, with the ADX line rising to indicate an uptrend. to close at the day’s high of 1,609.33, off an earlier low of 1,601.18, as gainers led losers 456 to 382 on turnover of 2.61 billion shares worth RM1.89 billion. Stocks stayed range bound on Friday, after optimism over global trade following signs the top two global economies would withdraw current trade tariffs in phases was offset by profit-taking ahead of the weekend. The index ended flat at 1,609.73 (+0.40) after moving between 1,606.02 and 1,614.19, as gainers edged losers 419 to 412 on active turnover of 3.1 billion shares worth RM2.15 billion. Trading range for the local blue-chip benchmark index last week shrank to 18.99 points, compared to the 29.59 points range the previous week, after it succeeded in climbing up to a fresh two-month high. For the week, the FBM-EMAS Index added 1.02 per cent to 11,395.72, while the FBM-Small Cap Index edged 0.26 per cent up to 13,721.75, as small cap stocks retained their strength on rotational retail buying. The past two week’s doubledigit weekly gains on the FBM KLCI has lifted the 14-day Relative Strength Index (RSI) momentum to a robust reading of 67.28, while the 14-week RSI reinforced the bullish reading on the daily indicator. However, the daily slow stochastics indicator stayed deep in overbought territory and is hooking down, signalling high possibility for profit-taking correction, but the weekly stochastics indicator contradicted the to be buffered by domestic activities to deliver a moderate growth of 4.7 per cent year-on-year in Q3 versus 4.9 per cent in Q2. Technical Outlook The FBM KLCI rose to close at a fresh seven-week high on Monday, helped by improving external sentiment after strong October jobs growth sparked a rally on US stocks to record highs the previous Friday, and by improving prospects for an initial US-China trade deal. The index climbed 10.22 points to end at 1,603.56, off an early low of 1,595.20, as gainers led losers 452 to 360 on steady turnover of 2.55 billion shares worth RM1.85 billion. Local blue-chips rose to a twomonth high the next day, lifted by positive spillover from overnight gains on US stocks to record highs. The FBM KLCI gained 3.18 points to settle at 1,606.74, off an earlier low of 1,597.76, but losers edged gainers 425 to 403 on total trade of 2.62 billion shares worth RM2.25 billion. Blue chips ended flat on Wednesday, in tandem with key regional markets. The index fell 3.49 points to settle at 1,603.25, off an early low of 1,597.18 and high of 1,609.64, as losers beat gainers 490 to 333 on total turnover of 2.7 billion shares worth RM1.72 billion. The following day blue chips firmed to end near session highs, shored up by optimism on reports that China has agreed with the US to cancel existing trade tariffs in phases. The FBM KLCI rose 6.08 points Conclusion Except for the daily stochastics indicator for the FBM KLCI, which is in the deep overbought region, suggesting a profit-taking pullback, other momentum and trend indicators register improved readings, signalling further upside potential. Looking ahead, a convincing breakout above the 200-day moving average resistance level, now at 1,637, will be crucial for upside extension towards next hurdle at 1,660, which is the 76.4 per cent Fibonacci Retracement (FR) of the 1,694 to 1,548 downswing. Sentiment-wise, however, the local market may fall for profittaking breather early this week after the US President indicated that he has not agreed to remove tariffs on Chinese imports, reducing optimism over the US being ready for a lasting agreement to scrap trade tariffs. A ‘wait and see’ attitude for taking fresh positions could also prevail as investors sit on the sidelines for Malaysia’s third quarter gross domestic product announcement this Friday. The subject expressed above is based purely on technical analysis and opinions of the writer. It is not a solicitation to buy or sell.