Local stock index at nine-month low

FBM KLCI remains biased towards downside

PETALING JAYA: An attempt by the FBM KLCI to surpass its year’s peak has resulted instead in a bout of persistent selling, pulling the benchmark index down close to a current nine-month low.

At yesterday’s close, the 30-stock gauge finished 0.32% lower at 1,714.42 points, making it possibly one of the region’s worst performers in a year, which has seen peers like the Indonesian and Philippines’ stock markets scaling to record highs.

In September, the FBM KLCI had tried to penetrate its peak of 1,796 created in June, but was unsuccessful largely due to a lack of buying interest. “It’s almost always like that. When the index tries to overcome its previous peak and when that doesn’t happen, it will trigger persistent selling,” a senior technical analyst said.

Analysts agreed that while the recent strong economic numbers are positive, a looming general election and uncertainties surrounding that are putting pressure on the local market.

In a note yesterday, Kenanga Research said the overall technical outlook of the FBM KLCI “remains biased towards the downside at the current juncture”.

Key simple moving averages, a market indicator, are currently in a “death-cross” state, while other key indicators continue to remain “directionless”, the research outfit told clients.

In simple English, a “death-cross” means market momentum taking a wrong direction.

Kenanga pointed out that ever since breaking below the previous support of 1,727 last week, the index has been trading within a thin 10-point range on subdued volumes.

“From here, further weakness could see the index breaking below the immediate support at 1,714, potentially capitulating towards the psychological barrier at 1,700.

“Conversely, should the market improve, upside resistance can be found at 1,734 and 1,750,” it said.

Danny Wong, fund manager and CEO at Areca Capital, feels that investors, particularly foreigners, will mostly stay away from the local market until there is some clarity on the GE front.

“This, unless there is an upgrade on specific stocks following stellar corporate earnings, if any,” he said.

Having said that, Wong, who manages about RM700mil in client money, added that he feels that the small-to-mid caps which have performed generally well this year in terms of earnings would continue to attract interest.

“I believe the local funds will continue to support and invest in these smaller companies and there is more room for them to grow,” he said. From a macroeconomic perspective, Malaysia has done generally well in recent times, reporting earlier this month a third-quarter gross domestic product figure that exceeded most expectations.

At 6.2%, the local economy expanded at its fastest pace in three years. Still, a clear disconnect between such a robust number and what is felt by the man on the street exists, based on latest Malaysian consumer sentiment figures, which indicated that sentiment continues to be below the optimism threshold.

Meanwhile, across the broader market yesterday, a total of 613 counters ended lower, 286 traded higher while 370 finished flat.

Following its recent lacklustre performance, the FBM KLCI is expected to remain pressured towards the support of 1,700 points, JF Apex Securities said.