FBM KLCI: Still bullish but weaker

FBM KLCI: Still bullish but weaker
Business & Markets 2013
Written by Benny Lee
Wednesday, 15 May 2013 10:07


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POSITIVE global market performances and bullish momentum last week boosted the local market performance in the past one week. The FBM KLCI recorded another historical high close yesterday after a short correction late last week. The benchmark index rose 0.6% in a week to 1,788.43 points after trading in a range between 1,752.26 points and 1,793.15 points. Trading volume was high in the past one week with a daily average of 2.5 billion shares compared with 1.5 billion shares two weeks ago. Both blue chip counters and second liners that have good liquidity rode the bullish trend. This basically indicates that both institutional and retail investors who stayed on the sidelines before the general election are now back in the market.

Improving retail sales and better job data are signs of an improving US economy, thanks to the monthly cash stimulus pumped into the economy by the Federal Reserve. Markets are still bullish but with a weaker momentum. The US Dow Jones Industrial Average increased 0.9% to 15,091.68 points on Monday. The index was at record high last Friday at 15,118.5 points. Markets in Europe were stronger last week. London’s FTSE 100 index rose 1.7% in a week to 6,631.76 points, the highest level in 5½ years. Germany’s DAX rose 2% to a record high at 8,279.29 points.

In Asia, markets were mixed but focus was still on the Japanese market. In just half a year, the market was able to catch up with the European market. The Japanese bourse continued to lead the Asian market with the Nikkei 225 Index jumping 4.1% in a week to 14,758.42 points, the highest level in 5½ years. The Nikkei has risen more than 50% in six months. Hong Kong’s Hang Seng Index declined 0.5% in a week to 22,930.28 points and China’s Shanghai Stock Exchange Composite Index fell 0.8% to 2,217.01 points. Singapore Straits Times Index rose 1.4% to 3,431 points.


Daily FBM KLCI chart as at May 14 using NextVIEW Advisor Professional.
Prices of commodities declined on the stronger US dollar while the ringgit remained firm in the past one week. The US dollar index rose from 82.38 points last week to 83.36 points on Monday. The ringgit is currently at 2.985 to the US dollar compared with 2.980 a week ago. Gold in Comex declined 2.7% in a week to US$1,429.70 an ounce while WTI crude oil in Nymex fell 1% to US$94.88 per barrel. Crude palm oil futures rose 1.8% in a week to RM2,301 per tonne as inventory fell below the two million mark in April, the first time in six months. However, the price actually pulled back from last Thursday’s RM2,320 because traders are looking forward to an increase in production and weaker exports in the coming months.

The KLCI managed to stay above the support level at 1,740 points and this means that the index is still on its way to the envisaged target of 1,850 points. The index is still trading near the top band of the Bollinger Bands indicator and other momentum indicators are still increasing. These indicators indicate that the momentum is still bullish. The bullish sentiment in the past two weeks is expected to extend this week as there are no signs of any reversal or weaknesses at the moment.

However, the market is technically overbought in both the short and long term. Daily and weekly stochastic indicator shows that the KLCI is overbought. Furthermore, the index is way above the short to long term 30- to 90-day moving averages which currently range between 1,600 points and 1,660 points. Therefore, market may still stay in a sideway correction mode until short term profit taking is over and the KLCI keeps recording new highs.

From a technical viewpoint, the market is still bullish but with a weaker momentum. As I mentioned earlier, the index should remain bullish as long as it can stay above the immediate support level at 1,740 points. We would probably only see a change in trend if the index breaks below the crucial 1,700 points. For short-term traders, it may be time to take some profit this week and buy back on dips. I would expect the index to trade sideways with a bullish bias, ranging between 1,770 and 1,800 points.


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 This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgment or seek professional advice for your investment decisions.


This article first appeared in The Edge Financial Daily, on May 15, 2013.

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