Market riding on a bullish trend

Business & Markets 2013
Written by Benny Lee
Wednesday, 08 May 2013 10:43
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THE market flew off the chart after the ruling coalition won the election
with a simple majority on Sunday and BN coalition leader, Datuk Seri
Najib Razak, was sworn in as the prime minister for a second term. The
market reacted positively to the victory and investors started buying
blue chip counters in the past two days. The market performed its
record best on Monday. The FBM KLCI opened 76.8 points higher at
1,771.62 and continued to climb as high as 1,826.22 points before
settling at 1,752.02. Yesterday, the market continued to charge
upwards and the KLCI settled higher at 1,776.73 points, 3.4% higher
than the previous week. Trading volume was exceptionally high in the
past two days, and the average daily volume in the past week was 1.5
billion shares compared with only 820 million shares two weeks ago.
The bullish sentiment on the local bourse was further fuelled by the
bullish global markets. The improving job report in the US last week provided more optimism about the global economic
recovery. Furthermore, the European Central Bank is ready to cut rates again if needed, and this further fuelled confidence in
the markets. The US Dow Jones Industrial Average rose to a historical high, climbing 0.9% in a week to 14,968.89 points on
Monday. London’s FTSE 100 index rose 1.4% in a week to 6,521.46 points last Friday. The market was closed on Monday
for the May Day holiday. Germany’s DAX is near a historical high after climbing 2.5% in a week to 8,112.08 points.
Japan led the Asian market as it continued to climb higher and surged above the 14,000-point mark. Japan’s Nikkei 225 index
increased 2.3% in a week to 14,180.24 points yesterday, its highest level in nearly five years. Hong Kong’s Hang Seng Index
rose 1.4% in a week to 23,047.09 points while China’s Shanghai Stock Exchange Composite Index increased 2.3% to
2,235.58 points. Singapore’s Straits Times Index increased only 0.4% to 3,383.16 points as profit taking began after a strong
performance two weeks ago.
Commodity prices were mixed as the US dollar strengthened a little in the past week. The ringgit strengthened after the
election. New York Mercantile Exchange (Nymex) West Texas Intermediate (WTI) crude oil rose 2.9% in a week to
US$95.79 (RM284.50) per barrel. However, Commodity Exchange (Comex) gold struggled to climb above US$1,500 and
declined 0.4% in a week to US$1,469.50 an ounce. The US Dollar index increased from 81.81 points a week ago to 83.38
points and the ringgit is currently at 2.97 against the US dollar compared with 3.04 a week ago. Crude palm oil futures for
July delivery declined 1.2% in a week to RM2,259 per tonne as traders await the Malaysian Palm Oil Board’s palm oil
statistics on Friday.
I mentioned last week that the market would continue its uptrend once the general election uncertainty is over, but the market
climbed beyond what I expected. I had expected the KLCI to climb to the uptrend resistance level at 1,750 points but on
Monday, the bulls charged and it climbed to 1,826.22 points before settling at 1,776.63 points. This performance will definitely
change the technical readings on the chart, which before the election showed weak momentum.
Trend-wise, the KLCI has been bullish since March after a two-month correction. Momentum indicators including RSI, MACD
and Momentum Oscillator started to climb higher again and the Bollinger Bands started to explode upwards indicating a
strong upward breakout. Breakouts like this could send the market much higher, and based on my projections, the KLCI may
climb to 1,850 points in the short term. New support levels are also being created. The immediate support level is at 1,740
points while a stronger support level is seen at 1,700 points. The market should remain bullish as long as the index stays
above these support levels.
With all the positive performances in the global markets and uncertainty removed from the general election, expect the local
market to ride this bullish trend. I’d expect the KLCI to remain bullish and set more record highs. Among sectors that may
benefit from the bull run are the banking and CONSTRUCTION []/property development (particularly companies involved in
Iskandar Malaysia, Johor) sectors.
Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa
Malaysia committed to offering the best services to a wide range of customers. He can be contacted at
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investment advice. Please exercise your own judgment or seek professional advice for your investment decisions.