Stronger market in the works

by **Cals** Sat 16 Jul 2016, 17:38

Saturday, 16 July 2016

Stronger market in the works

REVIEW: Bursa Malaysia started out the week on a steadier note, with the FBM KLCI gaining 1.30 points to 1,645.84 as most investors returned from the long festive break to indulge in bargain hunting, encouraged by a firmer US markets overnight.

A strong Asian markets added to the upbeat mood.
Consequently, the underlying tone of the domestic market was decisively positive while blue chips led the winners’ board, driving the key index to as high as 1,656.49 in the morning session.
However, mild profit-taking emerged unexpectedly in the afternoon and that has capped the upside potential of the local bourse.

At the final bell, Bursa Malaysia still chalked up some 9.33 points to 1,653.87, very much in line with overseas performance on Monday.
Overnight Wall Street extended the upward thrust, pushing the S&P 500-share Index into uncharted territory as upbeat economic figures continued to funnel investors into US equities but the black commodity lost 65 cents, or 1.4% to US$44.76 per barrel on concerns about oversupply.
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Given the mixed US landscape, the local bourse opened a shade below the flat line the following day, losing 0.29 of a point to 1,653.58 in cautious mood and traded in the negative territory for most of the day, as nervous investors opted to lock in profits, ignoring regional gains.
But losses were small, with the market generally fluctuating within a range on continuous bargain hunting interest cushioning the downside.
Apparently, that was the trend until the very last minute where a fresh bout of bidding in select quality issues helped lift the key index a hair above the horizontal line, up 0.1 of a point to 1,653.97 on Tuesday.
Buyers overwhelmed US markets in overnight session, thus triggering a robust rally in the Dow to record highs and crude prices spiking almost 5% to US$46.80 per barrel, the biggest jumped since April 8, amid growing optimism about solid growth in the world’s largest economy.
As expected, Asian equities followed US trend, with some major indices rose to within striking distance of their peaks this year amid greater risk appetite.
Against the bullish overseas backdrop, the local bourse perked up on persistent buying and gains in the heavyweights propelled the FBM KLCI up 6.42 points to 1,660.39 in mid-week, underpinned further by Bank Negara’s announcement of a 25 basis points cut in the Overnight Policy Rate (OPR) to 3%
Though world markets sustained the upward thrust on growing optimism of the global economy on Thursday, Bursa Malaysia went the opposite way in a surprising move, as investors digested the sudden news of a cut in the OPR the day earlier.
Financials succumbed to a bout of liquidation, pulling the key index down 5.61 points to 1,654.78 in mixed note.
Nevertheless, after a short breather, the local bourse rebounded on renewed buying. spurred by growing optimism about the health of the world’s second largest economy after the latest economic data showed China’s economy expanded slightly more-than-expected in the second quarter from a year earlier.
As usual, heavyweights led the way, driving the FBM KLCI up 13.62 points to 1,668.40 yesterday.
Statistics: For the week, the principal index edged up 23.86 points, or 1.5% to 1,668.40 yesterday, versus 1,644.54 on July 8.
Turnover for the regular week stood at 8.189 billion shares amounted to RM9.371bil, compared with 2.872 billion units worth RM3.377bil changed hands during the 2½-day holiday-curtailed previous week.
Outlook: Bursa Malaysia rebounded, with the FBM KLCI hitting the highest level in almost 2½-month on growing risks appetite, boosted by a combination of factors, such as a better-than-expected economic data from China, a series of record breaking Wall Street and a strong performance in regional markets.
Overseas equities remain strong apparently and they show no sign of tapering off just yet on anticipation of a massive stimulus to boost the global economy and the bet that Federal Reserve is in rush to raise interest rates in the wake of the UK decision to leave the European Union.
Against the positive offshore backdrop, the local market is poised to strengthen in the short-term, with investors’ confidence running high.
However, unlike the regional peers, where major indices were flirting near their peaks and the record breaking Dow, advances on the home front will be somewhat moderate this week while the FBM KLCI still is trapped inside the existing symmetrical triangle.
Initial resistance is anticipated at the uppermost 100-day simple moving average of 1,670 points.
The next upper stiff resistance is pegged at the descending trendline of the existing symmetrical triangle of 1,690 points, of which a decisive breakthrough followed by a breach of the 1,700 points psychological barrier would probably see the bulls becoming more aggressive.
Initial support is seen at the 1,650 points and a slip below the 1,638 points will drag the key index down to the 1,600 points floor.