Market to remain bullish
The market pulled back for a correction last week but the FBM KLCI still ended up higher in a week. Stronger ringgit and higher industrial output data has helped to support the market. The FBM KLCI rose 0.3 per cent in a week to 1,822.67 points and trading volume remained high, above the five billion shares mark.
The average daily trading volume has increased to 5.5 billion shares from five billion shares two weeks ago. The average daily trading value rose to RM3.9 billion from RM3.3 billion two weeks ago. This shows that lower-capped stocks, which are normally traded by retail market participants, continued to be the focus last week.
Stronger ringgit has attracted foreign institutions the ringgit rose to its strongest level in 1.5 years against the US dollar. Net buys from foreign institutions and local retail were RM772 million and RM166 million respectively. Net sell from local institutions was RM938 million.
In the FBM KLCI, gainers beat decliners 18 to 11 last week. The top gainers for the week were YTL Corporation Bhd (7.3 per cent in a week to RM1.48), Price Metal Aluminium Holdings Bhd (3.6 per cent to RM5.70) and Petronas Gas Bhd (3.5 per cent to RM19). The top decliners were Genting Malaysia Bhd (5.9 per cent to RM5.46), Digi.Com Bhd (3.9 per cent to RM4.70) and Genting Bhd (2.7 per cent to RM9.36).
The FBM KLCI was in line with the generally bullish global markets performance. In Asia, most markets closed higher in a week with Hong Kong Hang Seng Index rose to its highest level in 10 years. Singapore’s Straits Times Index rose to its highest level in 2.5. However, Japan’s Nikkei 225 Index pulled back after climbing to a historical high two weeks ago. In the west, the US Dow Jones Industrial Average and London’s FTSE100 Index rose to record highs but Germany’s DAX fell marginally for a correction.
The US dollar continued to face pressure. The US dollar Index fell to 90.9 points last Friday from 92 points the week before. The Malaysian ringgit strengthened against the US dollar and closed at RM3.97 against the US dollar last Friday from RM4 the week before.
Prices of major commodities remained bullish. Crude oil (Brent futures) rose three per cent in a week to close at US$69.81 per barrel, the highest in three years. Gold (COMEX futures) increased 1.4 per cent to US$1,338.30 an ounce, the highest in 4 months. In Bursa Malaysia, crude palm oil futures declined 1.7 per cent in a week to close at RM2,545 per metric tonne last Friday on rising inventory levels.
The FBM KLCI gained for the sixth week and this indicates that the market sentiment is still bullish. However, the gain was relatively lesser as compared to the previous two weeks and a ‘doji’ Japanese candlesticks pattern was formed. The pattern indicates that the market is uncertain or cautious.
Trend wise, there are not many changes to the technical indicators. The FBM KLCI remained strongly bullish above the short and long term 30 and 200 day moving averages. Furthermore, the index is above Ichimoku Cloud and the ADX indicator is also rising.
However, the momentum indicators like the RSI, MACD and Momentum Oscillator are starting to decline from its overbought levels and this indicates a weakening bullish momentum. A weak bullish momentum also means that the market is being cautious and hence started to book some profits. Nevertheless, the market trend is still bullish.
The pull back last week was not so significant and this indicates that the market is still being supported well. Henceforth, the index should continue to rally as the trend remained bullish. We expect the index to test the next resistance level at 1,860 points as long as it can stay above the current technical support level at 1,790 points. Stronger ringgit, higher crude oil prices and rebound in palm oil prices may the catalyst to support the equity market.
The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.