All eyes on Brexit BY K.M.LEE

by **Cals** Mon 20 Jun 2016, 02:09

Saturday, 18 June 2016

All eyes on Brexit

BY K.M.LEE

REVIEW: In line with traders’ expectation, Bursa Malaysia kicked off the week on a soft platform, with the bellwether FBM KLCI dropping 6.63 points to 1,634.59, extending the previous session’s selloff, dented by a sharp pullback in crude oil prices and the triple-digit losses in the Dow Jones Industrial Average the previous Friday.
An uninspiring performance in the Asia-Pacific region where stocks fell the most in over two months, added to the downbeat mood.
Against the negative overseas backdrop, the local bourse quickly drifted deeper into the red while losses in the blue chips dragged the key index to an intra-day low of 1,622.88 in early session.
At that moment, the local market appeared defenceless and in great danger of suffering more beatings, but fortunately, some big boys came out to nibble and hence, helping prices to trim early losses.

In lacklustre session, the FBM KLCI still lost some 11.45 points to 1,629.77 in a sea of red on Monday.
Overnight Wall Street took another dive the next day, its third declines in a row while crude oil prices drifted to the lowest in more than a week, as investors moved to the sidelines on worries about the Fed hiking interest rates in its upcoming policy meeting.

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Heightening concerns that Britain may vote to leave the European Union in a referendum on June 23, added to investors’ jitter.
As expected, most major markets in the region, with the exception of Shanghai Stock Exchange swooned on extended selling, tracking the slump in the Dow while “Brexit” fears continued to sap risk appetetite.
In line with the frail global sentiment, the local bourse tumbled to a low of 1,619.48 on lack of support, declining as much as 10.29 points, or 0.63% in early business, thus resulting in the FBM KLCI breaking down from the short-term ascending trendline.
Again, thanks to the local funds seeking value buys, as the market market later bouced off the day’s low and nullified an earlier technical breakdown.
In sluggish session, Bursa Malaysia eased 3.66 points to 1,626.11 on Tuesday.
In another almost similar fashion, the local bourse slipped below the existing short-term ascending trendline once again on Wednesday, touching an intra-day low of 1,619.78 in early hours before bouncing back to close a shade higher.
The positive close was largely attributed to gains in select blue chips and it was clearly displayed on the scoreboard.
Though the FBM KLCI chalked up 1.85 points to 1,627.96, snapping a four-day losses, the overall market breadth was negative, with decliners beating winners by 409 to 311 in mid-week.
Unfortunately, after a short pause, the local bourse resumed the downward momentum, because more investors moved to the sidelines despite the Fed keeping interest rates unchanged as “Brexit” weighed.
Blue chips bore the brunt of selling, dragging the key index down 13.06 points to 1,614.90 and caused a technical breakdown on the chart on Thursday.
However, yesterday, Bursa Malaysia rebounded, up 9.28 points to 1,624.18, encouraged by a steadier Wall Street overnight and regional markets.
Statistics: On a weekly basis, the principal index skidded 17.04 points, or 1% to 1,624.18 yesterday, compared with 1,641.22 on June 10.
Weekly turnover amounted to 7.169 billion units worth RM7.250bil, against 8.563 billion shares valued at RM8.258bil done a week ago.
Outlook: Bursa Malaysia deteriorated the past week, with the FBM KLCI violating the ascending trendline of the existing symmetrical triangle on extended liquidation pressure, thus resulting a technical breakdown on the daily chart.
Although the local bourse managed to trim some of the week’s losses yesterday, taking comfort of a firmer offshore tone, we are afraid the positive momentum may be short-lived, with prevailing uncertainty clouding equities.
While easing crude oil prices weigh on the local sentiment, all eyes are on the “Brexit” vote.
This may mean that the market will be very much muted, simply because investors are unlikely to commit big bets until the UK referendum is concluded next Thursday.
Should the outcome of the polls favour the “stay” camp, investors can expect overseas equities, including Bursa Malaysia to rally in the wake of frenzy buying.
On the opposite, if the “exit” group emerges as the winner, markets around the world will probably tumble on panic selling amid worries “Brexit” could tip global economy into turmoil.
Technically, indicators are painting a growing oversold situation. Under normal market contition, the local bourse will most likely rebound, but with “Brexit” ahead, range-bound trading can be expected.
Initial resistance is seen at the 1,627 points, followed closely by the 1,634-1,635 points band. The next upper hurdle is antipated at the 50-day simple moving average (SMA) of 1,660 points and the 100-day SMA of 1,671 points. A decisive breakout of the declining line of the existing symmetrical triangle of 1,705 will see the market turning more bullish.

Important support is pegged at the 1,600-point psychological level. A crack of this line may see the lower support of 1,568 points, 1,530-1,532 points range and the 1,500 points level becoming vulnerable.