Market has been directionless

by **Cals** Thu 10 Dec 2015, 00:54

Market has been directionless

By Benny Lee / The Edge Financial Daily | December 9, 2015 : 10:04 AM MYT

This article first appeared in The Edge Financial Daily, on December 9, 2015.

[You must be registered and logged in to see this image.]

The market was directionless in the past week with low volume as sentiment was cautious ahead of the [size=16]US Federal Reserve policy meeting next Wednesday. An increased interest rate is an indication of tighter money supply and this affects equity markets negatively. Crude oil prices have fallen to seven-year lows and a weaker ringgit weakened market confidence. The FBM KLCI declined only 0.8% in a week to 1,669.24 points yesterday. The ringgit weakened against the US dollar from RM4.20 last week to RM4.28 yesterday.

Trading volume declined significantly in the past week as the market stayed in the sidelines. The average daily trading volume in the past week declined from 2.6 billion shares two weeks ago to 1.9 billion shares. The average trading value fell from RM2.8 billion to RM1.8 billion.

Foreign institutions started selling last week on a weak ringgit. Net selling (from Monday to Friday last week) from foreign institutions was RM161 million while net selling from local retail was RM71 million. Local institutions’ net buying was RM232 million.

In the FBM KLCI, decliners outpaced gainers four to one. Top gainers for the week were RHB Capital Bhd ([You must be registered and logged in to see this image.] Valuation: 1.35, Fundamental: 1.10) (+4.7% in a week), Tenaga Nasional Bhd ( Valuation: 1.20, Fundamental: 1.30) (+1%) and Telekom Malaysia Bhd ( Valuation: 1.10, Fundamental: 0.80) (+0.9%). Top decliners were SapuraKencana Petroleum Bhd (Valuation: 1.40, Fundamental: 0.65) (-6.3%), Maxis Bhd ( Valuation: 1.10, Fundamental: 1.15) (-3.6%) and Sime Darby Bhd (Valuation: 1.40, Fundamental: 0.80) (-3.3%).

Markets in Asia were mixed last week. China’s Shanghai Stock Exchange Composite Index rose 0.3% in a week to 3,470.19 points yesterday. Hong Kong’s Hang Seng Index fell 2.1% to 21,905.13 points. Singapore’s Straits Times Index increased 0.2% in a week to 2,876.03 points. However, Japan’s Nikkei 225 Index fell 2.6% in a week to 19,492.60 points.

The United States market was firm and lacked direction while markets in Europe fell. On Monday, the US Dow Jones Industrial Average closed marginally lower at 17,719.92 points from last week. Germany’s DAX Index fell 2.6% in a week to 10,886.09 points, and London’s FTSE 100 fell 2.1% to 6,216.16 points.

The US Dollar Index futures declined from 100.2 points from last week to 98.8 points on Monday. The Commodity Exchange gold price declined 0.6% in a week to US$1,071 ounce. WTI crude declined 9.8% in a week to its lowest level in seven years at US$37.63 per barrel after the Organization of Petroleum Exporting Countries decided not to cut output. Crude palm oil on Bursa Malaysia increased higher on weaker output expectations. The price increased 2.5% in a week to RM2,397 per tonne.

The FBM KLCI fell below the short-term 30-day moving average temporarily as it rebounded to close higher. This shows that there is still support in the short-term uptrend. Also, the index is in the Ichimoku cloud indicator and this indicates uncertainty. The FBM KLCI has been on a thinning cloud in the past two weeks, but the cloud is going to expand in a week. Therefore, we are going to expect the trend to continue trending upwards in the next one or two weeks once this correction is over.

After three weeks of downwards correction, the index rebounded at the technical support levels — the short-term 30-day moving average, the short-term uptrend line, and the bottom band of the Bollinger Bands indicator.

We are going to expect the index to rebound, but the momentum indicators like the RSI indicate the sentiment is bearish. Therefore, the rebound would be weak and hence the FBM KLCI to trend only slightly higher this week, as long as the index is able to stay above 1,650 points. We will be expecting the index to moderately trend upwards to test the resistance level at 1,700 points towards the end of the year.

[/size]

[size]

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at[email=bennylee.kl@gmail.com][size=15][You must be registered and logged in to see this link.][/email]. 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.[/size]
[/size]