A steadier trend possible BY K.M. LEE

by **Cals** Sun 05 Jun 2016, 03:34

Saturday, 4 June 2016

A steadier trend possible

BY K.M. LEE
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REVIEW: Despite a moderately steadier overnight Wall Street, shares on Bursa Malaysia kicked off the week on a soft platform, with the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) losing a significant 4.51 points to 1,632.68, as investors opted to book profits following a three-day gain.
Sentiment on the broad-front was decisively frail while blue chips topped the losers’ board in early session on foreign liquidation pressure.
Elsewhere, most second and lower liners traded lower on lack of support from retail players, depressed further by a pullback in crude oil prices.
Meanwhile, a weaker ringgit against the greenback and an uninspiring performance of equities markets in the Asia-Pacific region reminded investors to exercise caution in their trading approach.
In lacklustre trade, the local bourse dipped to an intra-day low of 1,623.91, tumbling some 13.28 points in mid-morning before the local funds emerged from the sidelines to help the market bounced off the bottom.
At the close, the key index still shed 7.32 points to 1,629.87 on Monday.
There was no impetus from the US and London the next day, as markets there were shut for a public holiday.
As expected, Asian shares wobbled in early session amid extended correction process on expectations the US Federal Reserve will increase interest rates sooner than expected.
Though they managed to recover from a shaky start to trade mixed to marginally firmer later on expectations certain Chinese issues may be added to the MSCI Index for the first time and underpinned by a firmer European market, it was not helping Bursa Malaysia, as a frail ringgit continued to weigh on the local sentiment.
Apparently, stocks on the domestic front opened slightly easier in the absence of fresh leads on the horizon and slumped to an intra-day low of 1,624.34 in the afternoon amid follow-through losses in the blue chips before trimming losses in late hour to close down 3,87 points to 1,626.00 on Tuesday.
Overnight Wall Street fell 86.02 points to 17,787.20 and crude oil prices lost 23 cents to US$49.10 a barrel, spooked by a weaker-than-expected US consumer confidence data and a stronger US dollar respectively, on resumption of trading after a one-day break.
In Asia, most markets turned lower on Wednesday amid worries about the health of the Chinese economy, after the latest manufacturing activity reports showed lingering wakness in the world’s second-largest economy.
Given the dearth of buying incentives, many people had expected the local bourse to slip deeper into the red but surprisingly, it moved sideway throughout, ending almost flat, up 0.5 of a point to 1,626.50, thanks to the local big boys offsetting foreign selling in mid-week.
Thereafter, bargain-hunting interest offsetting profit-taking activity dominated the floor on the back of a better global sentiment and gains in select quality issues lifted the FBM KLCI up 4.03 points to 1,630.53 on Thursday and an extra 5.93 points to 1.636.46 yesterday.
Statistics: For the week, the principal index declined 0.73 of a point to 1,636.46 yesterday, against 1,637.19 at the final bell on May 27.
Weekly turnover stood at 8.640 billion shares amounted to RM13.314bil, compared with 8.514 billion units worth RM8.393bil changed hands previously.
Outlook: Bursa Malaysia was in consolidation mode, with the FBM KLCI generally trapped despite snapping its two-week winning streak.
Trading has been dull and it was like this since the local bourse found a shelter at the 1,611.91 points level on May 16 during the recent steep corrections but it is not surprising, given the prevailing global uncertainties, such as the directions of US interest rates and “Brexit” weighing on the local sentiment.
We reaffirmed that an upward adjustment in interest rates simply does not bode well for equities, as the cost of doing business would increase, thus eating into corporate earnings while the impact of Britain leaving the European Union is largely unknown for now.
Meanwhile, ringgit is still struggling with the charts showing the upward momentum in the greenback remaining constructive.
Though strong crude oil prices are good for the country, the local bourse may continue to tread waters until the vote in the UK is concluded on June 23.
Based on the daily chart, the FBM KLCI appeared to enjoy strong support above the recent lows of 1,611.91 points but face pretty stiff resistance at the 1,640 points barier.
A crack of the former floor will signal the resumption of a downtrend correction. If that happens, the 1,600 points psycholgical level and the lower support of 1,565-1,567 points will be vulnerable.
On the opposite, a clear breakout of the 1,640-point hurdle is likely to propel the key index up to either the 200-day SMA of 1,660 points, or the 100-day SMA of 1,670 points or the 50-day SMA of 1,675 points on fresh buying interest.
Technically, Bursa Malaysia is expected to advance, given the fact that most of the short-term indicators are improving.