Bullish KLCI trend to remain strong in early January

by **Cals** Thu 02 Jan 2014, 10:07

Business & Markets 2013

Written by Benny Lee

Thursday, 02 January 2014 09:54

SHARES ended higher last week as strong rallies in the US and European markets finally boosted Asian markets. The US market sentiment was strengthened by the Federal Reserve’s commitment to maintain low interest rates until the job market picks up while reducing the monthly bond buying stimulus programme.

The Dow Jones Industrial Average and S&P500 indices climbed to historical highs. On the local front, the FBM KLCI is set to climb to historical highs after pulling back two weeks ago. Asian markets, which were directionless in the past few weeks, started to rise as we expected markets to end higher last year due to window dressing.

The local market benchmark KLCI increased 2.2% in a week to a record high of 1,872.52 points on Monday after rebounding from a low of 1,828.48 points.

Gainers in the KLCI outpaced decliners 13 to two in the past one week and were led by Petronas Dagangan Bhd (+5.0%), SapuraKencana Petroleum Bhd (+4.9%) and MISC Bhd (+4.6) while decliners were led by YTL Corp Bhd (-1.8%), CIMB Group Holdings Bhd (-0.7%) and AMMB Holdings Bhd (-0.6%).

Global markets were bullish in the past week except for China, which struggles to keep its economic growth strong. Singapore’s Straits Times Index increased 1.2% in a week to 3,153.29 points on Monday. Hong Kong’s Hang Seng Index rose 1.4% to 23,244.87 points while Japan’s Nikkei 225 index increased 2.6% in a week to its highest level in 6½ years at 16,291.31 points.

However, China’s Shanghai Stock Exchange Composite Index increased only 0.4% to 2,097.53 points. The US Dow Jones Industrial Average increased 1.3% in a week to a record high at 16,504.29 points. UK’s FTSE 100 index rose 0.8% to 6,731.27 points while Germany’s DAX Index increased 0.7% to 9,552.16 points after pulling back from a historical high last Friday.

The US dollar weakened against major currencies in the past week after a bullish rally two weeks ago and commodity prices remained firm. The US dollar index declined from 80.62 points to 80.12 points. The ringgit was firm from last week at RM3.29 against the US dollar.

Commodity Exchange gold closed firm from last week at US$1,196 (RM3,922) an ounce. New York Mercantile Exchange WTI crude oil also stayed firm at US$99.20 per barrel. Crude palm oil increased 0.5% in a week to RM2,629 per tonne.

The KLCI’s bullish trend may continue for the first one or two weeks of the new year. The bullish trend is strong as the index maintained above the short term 30-day moving average, despite the pullback two weeks ago, and broke above the short-term uptrend channel. Furthermore, the index is above the Ichimoku Cloud indicator.

Momentum indicators, which indicated weak bullish momentum in the past two weeks, started to turn strong last week and this momentum is likely to continue this week. The RSI rebounded near the middle level, indicating a stronger bullish momentum. Furthermore, the index rebounded from the middle band of the Bollinger Bands and is now trading at the top band of the Bollinger Bands.

The KLCI rose 11%, making 2013 the fifth consecutive year of increase. The index has provided a 113% return in five years after the sub-prime mortgage crisis in the US.

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Daily FBM KLCI chart as at Dec 30, 2013.

Next year will be a challenging year for markets to maintain the bullish trend. As for the KLCI, the trend should remain bullish as long as it stays above the long term 200-day moving average support level at 1,750 points. It may even climb to 2,000 points in the first half of the year if it stays above the immediate support level at 1,800 points.

Hope you had a great year and wishing you a better 2014.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia committed to offering the best services to a wide range of customers. He can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.

This article first appeared in The Edge Financial Daily, on January 02, 2014.