More technical recovery seen

REVIEW: Riding on the overwhelming positive leads from the US equities overnight and inspiring market performance in the Asia-Pacific region, many people had expected the local bourse to perform accordingly in the wake of fresh buying interest at the start of the week.

But that was not the case, Bursa Malaysia’s bellwether, the FBM KLCI began on the negative side, easing 0.36 of a point to 1,755.22, extending the previous session’s downtrend amid follow-through profit-taking selling.

Select blue chips topped the decliners’ board on foreign fund selling.

Elsewhere, most second liners and penny stocks also struggled on lack of support from retail players, as a sharp depreciation of the ringgit against the greenback depressed the local sentiment.

Meanwhile, a weaker factory orders in September also was not helping.

In an underperformed situation, the key index tested the crucial support floor of 1,750 points in the afternoon before trimming losses in late hours to settle down 0.8 point to 1,754.78 on Monday, its 10th in a row.

There was no stopping for the bulls on Wall Street, with all three major indices setting new records the next day on growing optimism about bright outlook for corporate earnings and Trump’s tax reform plan while investors took a bullish view of the US economy after the Institute for Supply Management said its index of factory activity spiked to 60.8 last month, the best since May 2004, from a reading of 58.8 in August.

As expected, Asian markets climbed on follow-through nibbling, led by the Hang Seng Index, rallying almost 2% while Japan’s Nikkei 225-share Index hit a two year high, with investors cheering the latest strong economic data filtered out from the US.

At home, Bursa Malaysia, which was on a slide for the 10th consecutive session and technical indicators screaming oversold, no longer could ignore the positive overseas trend and hence, the much-needed relief recovery came about.

Although there was a bout of buying in the marketplace, the broad-market tone was mixed and it was clearly dis- played on the scoreboard.

In spite of the FBM KLCI rebounding 4,89 points to 1,759.67, decliners and advancers almost evenly matched at 403 and 410 respectively on Tuesday.

Nevertheless, the local bourse sustained recovery and in line with the firmer global showing, the local bourse added an extra 2.17 points to 1.761.84 on better sentiment after the World Bank raised its growth forecasts for East Asia and the Pacific, including Malaysia, for 2017 and 2018.

Sadly, after posting gains for two straight day, investors were quick to take profits despite Wall Street surging deeper into uncharted territory. The regional bourse traded higher on persistent buying while Shanghai was shut for a week-long holiday.

Blue chips led declines amid selling by foreign funds, dragging the FBM KLCI down 2.75 points to 1,759.09.

But in spite of the lower close, market breadth was positive, with winners beating losers by 487 to 360 on Thursday.

Thereafter, bargain hunters dominated the floor but there was still a sense of caution on the broader front, with the key index rebounding 4.91 points to 1.764.00 yesterday.

Statistics: On a Friday-to-Friday basis, the principal index rose 8.42 points, or 0.5% to 1,764.00 yesterday, versus 1,755.58 on Sept 29.

Total turnover for the week was 12.291 billion units worth RM9.66bil, against 12.695 billion shares amounted to RM11.575bil changed hands a week ago.

Outlook: Bursa Malaysia was generally drifted sideways with a mild upward bias in cautious mood, with the FBM KLCI snapping a two-week losing streak on renewed bargain hunting interest the past week.

Based on the daily chart, the local bourse had avoided a major breakdown once again and despite the market proving to all of us that the 1,750 points level is indeed a concrete support, stocks still in great danger of going underwater, unless the key index is able to move further away from the lower flat line of the existing rectangular box.

Moving forward, while a robust US economy and growing optimism over US tax reform plans may continue to propel the bulls on Wall Street to fresh record highs and help lift global stocks, including those on Bursa Malaysia, a pretty stronger greenback versus the ringgit and persistent liquidation by foreign funds moving back to the developed economy betting for a rate hike, are likely offset the bullish sentiment somewhat.

Given the mixed leads on the horizon, the local bourse is likely to extend the present trend, which may see the local bourse inching up gradually in a see-sawing fashion while investors adopting a cautious stance until fresh catalyst emerges.

Technically, indicators are equally tricky. Although there was an improvement in the daily slow-stochastic momentum index, the 14-day relative strength index and the moving average convergence/divergence histogram (MACD), the weekly slow-stochastic momentum index and the weekly MACD continue to deteriorate, suggesting the market may trade range-bound to slightly steadier this week.

Solid support and heavy resistance are maintained at 1,750 points and 1,800 points respectively while Bursa Malaysia appears trapped.