Rebound in sight MARKET TREND: BY K. M. LEE

Published: Saturday August 24, 2013 MYT 12:00:00 AM
Updated: Saturday August 24, 2013 MYT 8:16:55 AM
Rebound in sight

MARKET TREND: BY K. M. LEE

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REVIEW: Bursa Malaysia kicked off the week on a weak platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) dropping an unexpected 13.74 points to 1,774.50 in the wake of selling pressure, exacerbated by a lower close in overnight Wall Street.

Given the frail sentiment, the key index quickly slumped to a low of 1,771.65 and after falling as much as 16.50 points in the early session, some local funds emerged to seek value buys, thus lifting the local bourse back to the positive territory at one point in mid-morning.

However, the recovery was short-lived, as the bulls were met with another bout of foreign liquidation in the afternoon on domestic economic worries and depreciation of the ringgit against the greenback.

A slew of negative newsflow in the region also spooked investors on the home front and at the end of Monday’s session, the key index declined 9.88 points to 1,778.36 in lacklustre trade.

Overnight Wall Street continued to swoon, as investors trimmed their portfolio ahead of an expected shift in Federal Reserve policy.

Elsewhere, stocks in the Asia-Pacific region sustained the downward spiral the following day, led by Jakarta’s Composite Index, plunging a huge 5.5%, as hot money made an exit from emerging markets.

In the absence of compelling leads, Bursa succumbed to tremendous stress to retreat.

Fierce liquidation was evident across the board, pulling the FBM KLCI down a hefty 32.94 points to 1,745.42 on Tuesday.

Then, after a series of beating, Wall Street showed signs of stabilising, finishing little changed in the negative territory. In Asia, stocks turned mixed in cautious mood, awaiting the minutes of the US Federal Reserve’s July policy meeting.

Mirroring the overseas style, the local bourse eased a minor 0.57 point to 1,744.85 in a generally sideways pattern in mid-week, pending the release of Malaysia’s second-quarter economic data.

On Thursday, global equities worsened in the wake of fresh selling, as the outcome from the US Federal Reserve’s July meeting offered few flues on the timing of a reduction in its bond-buying programme.

Sentiment was further depressed by the latest released by Bank Negara of the second-quarter gross domestic product which came in below expectations and the softening ringgit.

On resumption of a downward spiral, the FBM KLCI dived 24.48 points to 1,720.37 that day before recouping 0.7 point to 1,721.07 on mild relief technical recovery, aided by a rebound in overseas stock exchanges yesterday.

Statistics: On a Friday-to-Friday basis, the principal index tumbled 67.17 points, or 3.8% to 1,721.07 yesterday, versus 1,788.24 on Aug 16.

Weekly turnover stood at 11.571 billion shares valued at RM14.207bil, against 10.336 billion units worth RM8.973bil done previously.

Technical indicators: The daily slow-stochastic momentum index triggered a short-term buy at the very oversold territory yesterday, but it could not be confirmed yet, as the two oscillators were still trending at the bearish zone.

Similarly, the 14-day relative strength index improved slightly from a reading of 12 to finish at the 21 points yesterday

In stark contract, the daily moving average convergence/divergence (MACD) histogram sustained the downward expansion against the daily signal line to stay bearish. It had triggered a sell late last month.

Weekly indicators were negative, with the weekly slow-stochastic momentum index and the weekly MACD continuing to deteriorate.

Outlook: The sharp depreciation of Indonesia and India’s currencies had investors bringing back the dark episode of the 1997/98 Asian financial crisis for debate apparently.

Though one group said this may be the beginning of the round two of the Asian currency catastrophe, the opposite side said it is unlikely, as our financial position this time is much stronger compared with the past.

Meanwhile, an expert opined that the recent volatility of the market was due to the flow of funds back to the more advanced economies and it is a temporary phenomenon.

Whether we will see a repeat of the 1997/98 carnage or not, we will know eventually, but for now, the local bourse still is bullish despite witnessing a couple of negative crossings and breakdowns on the chart over the past several days.

A slip below the 1,700 points psychological level may prompt us to turn cautious, but we will keep our bullish stance, as long as the key index stays above the 4½-year old ascending line, now resting at 1,665 points and still rising.

Technically, the ticking up pictogram on the daily slow-stochastic momentum index and the 14-day RSI from the bottom offer investors a ray of hope of a relief recovery, but the upside may be limited, as other indicators were negative and the prevailing external uncertainty clouding equities.

Initial resistance is expected at 1,740 points, followed by the 1,760 points level and the 21-day simple moving average of 1,780 points.