FBM KLCI may need time to evaluate Brexit

by **Cals** Thu 30 Jun 2016, 00:33

FBM KLCI may need time to evaluate Brexit

By Benny Lee / The Edge Financial Daily | June 29, 2016 : 9:51 AM MYT
This article first appeared in The Edge Financial Daily, on June 29, 2016.

The market rebounded last week on bargain hunting as expected but was cautious ahead of the Great Britain’s exit from the European Union (EU). Markets, including equity and currency markets, were volatile last Friday after the UK decided to leave EU. However, the FBM KLCI managed to close 0.6% higher at 1,634.05 points.
Trading volume was low most days of last week but was high last Friday as bulls and bears fought fiercely. The average daily trading volume last week was 1.6 billion shares compared with 1.5 billion shares two weeks ago. The average daily trading volume increased from RM1.6 billion to RM1.8 billion.
Support from the market came from local retail investors as foreign institutions continued to sell especially on last Friday as the ringgit weakened. Net buy from local retail investors in the past one week was RM108 million, while net buy from local institutions was only RM26 million. Net sell from foreign institutions was RM134 million. The ringgit strengthened slightly against the US dollar from RM4.10 to a US dollar a week ago to RM4.07.
In the FBM KLCI, gainers outpaced decliners 17 to 10. The top gainers for the week were IHH Healthcare Bhd (+4.7% in a week to RM6.70), DiGi.com Bhd (+3.2% to RM4.80) and Maxis Bhd (+2.1% to RM5.80). The top decliners were SapuraKencana Petroleum Bhd (-4.3% to RM1.35), Genting Bhd (-2.2% to RM7.88) and YTL Corp Bhd (-1.8% to RM1.60).
Asian markets’ performances were mixed but Japan fell to its lowest in 20 months. China’s Shanghai Stock Exchange Composite Index declined 1.1% in a week to 2,853.63 points last Friday. Hong Kong’s Hang Seng Index rose 0.4% in a week to 20,259.13 points while Singapore’s Straits Times Index declined 1.0% to 2,735.39 points. Japan’s Nikkei 225 index fell 4.1% to 14,952.02 points.
Markets in the US and Europe were also mixed. The US Dow Jones Industrial Average declined 1% in a week to 17,500.39 points last Friday. Germany’s DAX Index fell 0.8% in a week to 9,557.16 points and London’s FTSE 100 Index increased 2% to 6,138.69 points despite the UK exiting the EU.
The US dollar weakened most of the days last week but strengthened last Friday. The US Dollar Index futures rose from 94.3 points to 95.3 points last Friday. Gold jumped last Friday as currencies turned volatile. COMEX Gold increased 1.5% in week to US$1,320.30 (RM5,360.42) an ounce. Crude palm oil in Bursa Malaysia fell 2.7% in a week to RM2,382 per tonne on demand worries.
The FBM KLCI rose above its short-term 30-day moving average last week but pulled back to the average last Friday. The whipsaw against the moving average indicated short-term uncertainty. In the long term, however, the trend is still bearish as the index continues to stay below the long-term 200-day moving average and the Ichimoku Cloud.
Support level is strong at 1,610 points. In the past one month, the FBM KLCI has rebounded whenever it fell to this level, including last Friday when there was strong selling pressure. Despite being bearish in the long term, the bullish divergence on the Relative Strength Index indicator shows that there is strong support.
The FBM KLCI is still within the sideways range between 1,610 and 1,640 points. After the UK exit, the market may need sometime to evaluate the situation. If the FBM KLCI stays between these levels, the market is still uncertain. However, a breakout above 1,640 points indicates a bullish sentiment and the market may start to rally but a breakout below 1,610 points could cause a major decline and we are talking above the index falling to 1,500 points. Let’s see which level the FBM KLCI breaks.

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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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