Bursa Malaysia turns the corner

Review: As the year draws to a close, the bulls were seen returning to the market with jumps above a couple of key resistance levels as year-end window dressing came into effect.

The positive movement brought the FBM KLCI back above the key resistance level of 1,750.

While the bourse had seen a return of positive energy in the previous week following strong corporate earnings results, the latest buying activity saw the index break out of the short-term descending pattern.

Coming out of the weekend, cryptocurrency was on investors’ minds as the launch of bitcoin futures contracts on the CBOE pushed the digital commodity to manic price levels.

However, it was quiet on Bursa Malaysia as the state-wide holiday in Selangor on Monday meant thin trading volumes. The local index stayed uninspired, closing 1.78 points lower at 1,719.47 points.

There was some trepidation in Asian markets on Tuesday as investors looked ahead to Wednesday’s US Fed meeting that would confirm a widely expected interest rate hike.

Asian markets slipped back after three sessions of gains but held relatively steady as the region continued to revel in what experts call a “Goldilocks” moment, where economic growth and fundamentals remain stable, i.e. neither too hot nor cold.

The FBM KLCI, however, experienced healthy gains of 10.10 points to 1,729.57 as negative pressures in the market finally gave way to underlying bullishness brought on by a positive economic outlook.

Foreign buying resumed on the market and maket breadth was positive, setting the course until the rally on Thursday and reversing a trend that had plagued Bursa in previous weeks.

This bullish mood was no doubt also given a boost by higher oil prices. A hairline fracture was found in the UK North Sea pipeline, which helped to underpin the gobal benchmark index of crude oil, and the start of a weeks-long shutdown resulted in Brent soaring above the US$65 mark.

That same day, investors received technical confirmation the market had turned a cor- ner; a small push in the right direction would bring the index across the 1,730 psychological resistance, which would free it to roam higher.

Starting the mid-week session with the bullish result of record closes on Wall Street, the KLCI saw gains in some financial heavyweights, including Public Bank, whose funds were due to close their books for the financial year.

The index crossed the 1,730 level by mid-morning and closed 8.09 points higher at 1,737.66 points.

On Thursday, the KLCI continued its ascension with an impressive 21.34 points to 1,759 points, resulting in a breach of the crucial 1,750 level.

The financial sector led the advance with the country’s four largest banks - Maybank, Public Bank, CIMB and Hong Leong Bank – surging ahead. Foreign investors were net buyers to the tune of RM310.4mil, a net purchase of about 10% of the day’s turnover value.

In the wider region, the overnight US interest rate hike did not have the negative effect that some had feared as anxiety over further monetary tightening in 2018 was alleviated by projections of low inflation rates.

This mitigated losses in Asian indexes although by the end of the day, most were in the red even as China’s own small, five-basispoint interest rate hike added to concerns of tighter liquidity.

Profit-taking on Bursa Malaysia was expected for Friday on the heels of large gains. Disagreements between Republicans also posed the wider threat of a derailment to the proposed US tax reform, which dampened Asian markets.

Opening lower, the index rose briefly into the 1,760 resistance level before descending to close 5.93 points weaker at 1,753.07 points.

Statistics: on a week-on-week basis, the major index was up 31.82 points or 1.8% to 1,753.07 yesterday, versus 1,721.25 on Dec 8. Total turnover for the regular week stood at 11.074 billion shares amounting to RM13.647bil, compared with 8.859 billion shares valued at RM12.051bil exchanging hands the previous week.

Outlook: The positive growth outlook from research analysts are buoying sentiment for Bursa Malaysia. Despite fears of liquidity drying up as major central banks unwind accomodative policies, the G3 economies are expected to drive global growth.

The World Bank forecasts Malaysia’s gross domestic product to grow at 5.8% on-year for 2017 and 5.2% for 2018. To that effect, the ringgit is forecast to strengthen, which in turn suggests more foreign inflows into the domestic market.

In a sentiment-driven marketplace, the shift to an uptrend over the last few days may serve as a trigger for investors to return to the market, at least until the end of the year, following weeks of doubt and trepidation.

Technical indicators suggest a continued uptrend.

Nevertheless, the FBM KLCI now sits comfortably above a buffer in the form of the 1,750-point line, which supported the index between April 26 to Nov 15.

The next support is pegged at 1,730. To the upside, immediate resistance sits at 1,765 while the next target rests at 1,800.