Bulls roam higher on budget approval
REVIEW: There have been big swings in the domestic market as strong bullish sentiment over a recovery is held in check by equally strong profit-taking from investors wary of being overly optimistic amid the ongoing pandemic.
However, the passing of Budget 2021 in Parliament on Thursday lifted a lid on the rally that had stayed mostly capped by the 1,600-point mark prior.
Double-digit increases and declines over the course of the week saw the FBM KLCI staying mostly within the 1,580 to 1,600 trading range, with a late-week jump to 1,610 following Parliament’s nod to the Budget 2021 bill.
Short of crossing the 1,620 mark, however, the market remains caught in a rangebound motion.
While news of a third Covid19 vaccine successfully passing its trials helped to bolster the predominantly bullish mood, coronavirus cases around the globe continue to mount.
As it stands, movement restrictions and lockdowns remain a threat to the global economy.
On the FBM KLCI, the imbalance between the weighting of rubber glove counters and the other members of the key index seem to be rectifying itself.
While the two index-linked counters have been losing weight – especially Top Glove due to the Covid-19 outbreak at its worker dormitories – other sectors have been on a rally.
The slump in the glove counters were mainly responsible for the 19-point decline on the FBM KLCI on Tuesday, which took the index slightly under its support at 1,578.
Fortunately, the global trend remained on a high especially given Astrazeneca’s Tuesday announcement of its own vaccine discovery.
The growing momentum over a global recovery was marked that night by the Dow Jones Industrial Average crossing the 30,000-point mark for the first time in its history.
As it opened on Wednesday, Malaysia’s FBM KLCI tracked the positive sentiment on Wall Street, reversing the losses it had seen in the previous session.
Oil and gas counters stood out as the price of Brent crude rallied to an eight-month high of US$48.80 a barrel.
As Parliament voted in favour of Budget 2021 on Thursday, the political uncertainty that had investors on edge eased, leading to a jump of nearly 15 points.
This put the FBM KLCI back on a more bullish mood, which was evidenced by a challenge to the 1,620 resistance in yesterday’s trading.
Profit-taking prevented a break out, leading to a week’s close of 1,607.59 points.
Statistics: The major index ended the week 13.84 points or 0.9% higher over the previous Friday at 1,607.59.
Total turnover for the trading week stood at 45.93 billion shares amounting to Rm23.18bil compared with 65.45 billion shares worth Rm29.4bil in the previous trading week.
Outlook: A bullish sentiment has returned to the market after a brief period of consolidation.
However, as the week ended without a successful crossing of the 1,620 resistance, profit-taking in the coming week could mean another period of sideways trading over the coming term.
As the third-quarter corporate earnings season comes to a close on Monday, results so far have been broadly improved over the preceding second quarter.
Axiata notably jumped over 11% yesterday on the back of its earnings recovery.
As such, there could be some residual upsides to trigger another challenge to the resistance.
The technical indicators are looking bullish while the 14-day relative strength index is left with room to grow before hitting overbought levels, suggesting that the rally could continue.
The slow-stochastic meanwhile is progressing sharply into extreme overbought conditions, with no signs of slowing yet.
Resistance is found at 1,620 and 1,645 while support is pegged to 1,600 and 1,580.