FBM KLCI clouded by Brexit and weak ringgit
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FBM KLCI clouded by Brexit and weak ringgit
FBM KLCI clouded by Brexit and weak ringgit
By Benny Lee / The Edge Financial Daily | June 23, 2016 : 9:49 AM MYT- [You must be registered and logged in to see this image.]
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This article first appeared in The Edge Financial Daily, on June 23, 2016.
The market continued to decline last week on possible British exit from the European Union (aka Brexit) and a weak ringgit. Declining commodity prices also weighed down market sentiment. The FBM KLCI declined 1.8% in a week to 1,624.18 points last Friday. The market rebounded last Friday on bargain hunting.
Trading volume declined as the uncertainty in the markets made players stay on the sidelines. The average daily trading volume last week was only 1.5 billion shares, compared with 1.8 billion shares two weeks ago.
Foreign institutions continued to exit from the local market as ringgit weakened. Net selling from foreign institutions last week was RM912 million. Net buying from local institutions and local retailers were RM598 million and RM314 million respectively. The ringgit slightly strengthened against the US dollar from RM4.08 per US dollar two Fridays ago to RM4.10.
In the FBM KLCI, decliners beat gainers by seven to three. The top gainers for the week were Hong Leong Bank Bhd (+2.5% in a week to RM13.36), DiGi.Com Bhd (+1.8% to RM4.65) and PPB Group Bhd (+1.5% to RM16.28). The top decliners were SapuraKencana Petroleum Bhd (-14% to RM1.41), CIMB Group Holdings Bhd (-5.4% to RM4.24) and Genting Malaysia Bhd (-4% to RM4.27).
Asian markets were bearish. China’s Shanghai Stock Exchange Composite Index declined 1.4% in a week to 2,885.04 points last Friday. Hong Kong’s Hang Seng Index fell 4.1% in a week to 20,169.98 points and Singapore’s Straits Times Index declined 2.1% to 2,763.42 points. However, Japan’s Nikkei 225 index fell 6% to 15,599.66 points.
Markets in the US and Europe fell as Britain got close to voting on exiting the European Union. The vote for the referendum will be held today. The US Dow Jones Industrial Average declined 1.1% in a week to 17,675.16 points last Friday. Germany’s DAX Index fell 2.1% in a week to 9,631.36 points and London’s FTSE 100 Index declined 1.5% to 6,021.09 points.
The US dollar strengthened marginally against major currencies on Brexit. In a week, The US dollar index futures rose from 94.9 points to 94.3 points last Thursday. Uncertainty in Europe also pushed gold prices higher. Commodity-exchange gold increased 1.9% in week to US$1,300.10 (RM5,239.40) an ounce. Crude palm oil in Bursa Malaysia fell 5.1% in a week to RM 2,580 per tonne.
The FBM KLCI rebounded two weeks ago but pulled back to settle at the level before the rebound and this simply indicated that market confidence remained weak. The trend was bearish as the index was below both the short- and long-term 30- and 200-day moving averages. The index was also below the Ichimoku Cloud indicator.
Momentum indicators were indicating a stronger bearish momentum developed in the past one week. The Relative Strength Index indicator was below its mid-level and the moving average convergence divergence indicator below its moving average. The index fell from the top band to the bottom band of the Bollinger Bands indicator. Furthermore, the Ichimoku Cloud indicator was getting thicker and this indicated that we should be expecting stronger resistance.
The FBM KLCI was back to the sideways range before the rebound two weeks ago, which was between 1,610 and 1,640 points. The index was near the support level and hence we expect some technical rebound this week. However, we expect the rebound in the market to be met with selling pressure as sentiment still has not improved and the trend is still bearish.
After failing to break above the resistance level at 1,660 points two weeks ago, market sentiment is still bearish. In the short term, the FBM KLCI is expected to stay between 1,610 and 1,640 points until the Brexit situation settles.
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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]
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