Market braces for budget

by **Cals** Sun 20 Oct 2013, 18:56

Published: Saturday October 19, 2013 MYT 12:00:00 AM
Updated: Saturday October 19, 2013 MYT 8:22:05 AM
Market braces for budget
BY K.M.LEE
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KLCI
REVIEW: Against the overseas bearish backdrop, Bursa Malaysia started out on a soft platform, with the benchmark FBM KL Composite Index (FBM KLCI) shedding a hefty 10.64 points to 1,775.11 on renewed selling pressure.
But fortunately, the downward spiral was later proven to be just a knee-jerk reaction to the weak offshore tone.
Unlike foreign funds and retail investors, the local institutional players were pretty calm and instead of liquidating, they took the opportunity to buy on dips ahead of Budget 2014, to be tabled in parliament on Oct 25.
As heavyweights bounced off the ebb, the key index reversed early losses to achieve a high of 1,788.53 in mid-morning before turning sideways, criss-crossing the flat line for the rest of the day, awaiting for a fresh catalyst to emerge.
At the close, the key index eased a small 0.99 of a point to 1,784.76 in cautious trade on Monday.
Nevertheless, global equities were steadier on Tuesday, as traders covered their short positions in the wake of new signs that an agreement would be reached between US political parties to end the government shutdown as the clock ticked nearer to the deadline.
Stocks on Bursa Malaysia traded higher on Wednesday, playing catching up on resumption of business after a one-day break due to Hari Raya AidilAdha celebrations on Tuesday.
As usual, blue chips attracted significant interest from big funds, but second and lower liners were mostly flat to lower on profit-taking.
In a generally mixed session, the key index chalked up some 6.61 points to 1,791.37, with winners narrowly beating losers by 395 to 374 in mid-week.
Thereafter, bargain hunters dominated the floor as global sentiment continued to improve after US senate leaders announced that a last minute deal has been struck, which will reopen the government that has been partially closed since Oct 1, and raise the debt ceiling until February next year, thus preventing the US from defaulting on its debt.
Again, quality issues led gains, driving the FBM KLCI up 6.05 points to 1,797.42 on Thursday and an additional 2.17 points to 1,799.59 amid extended bargain-hunting interest yesterday.
Statistics: Week-on-week basis, the principal index scaled 13.84 points, or 0.8% to 1,799.59 yesterday, against 1,785.75 at the close on Oct 11.
Total turnover for the four-day holiday-curtailed week stood at 6.172 billion shares worth RM6.707bil, versus 8.339 billion units valued at RM7.246bil changed hands during the regular previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were fast reaching overbought territory. It had issued a short-term buy at the mid-range on Monday.
Likewise, the 14-day relative strength index sustained the upward thrust from the 43-point level on Oct 9 to settle at the 76-point level. A reading above 70 suggests overbought condition.
Meanwhile, the daily moving average convergence/divergence (MACD) histogram continued to expand positively against the daily signal line to stay bullish. A buy signal was sighted on Wednesday.
Weekly indicators were little changed, with the weekly slow-stochastic momentum index and the weekly MACD keeping their sell signal.
Outlook: Bursa Malaysia extended the uptrend, with the FBM KLCI posting gains for the third consecutive week amid continuous bargain hunting nibbling, as the end of the US debt drama underpinned riskier assets.
Based on the daily chart, the bulls appear facing immense pressure and great difficulty to keep their posture above the 1,800-point psychological level for long since May 6.
If the pattern carved out post-13th General Election was a piece of reliable guidance, a significant market pullback on correction would be on the cards.
However, we reckon the market is likely to stay above waters ahead of Budget 2014 and riding on the strength of China’s economy which grew by 7.8% in the third quarter, its fastest pace this year.
Technically, indicators continue to improve, albeit on a slow pace, suggesting range-bound style, with a mild upward bias in the immediate term.
Significant resistance is maintained at 1,811.65 points and the next upper strong hurdle is pegged at the historical peak of 1,826.22 points, of which a major breakout would send the bulls into uncharted territory.
Current support is seen at 1,780 points, followed by 1,770 points. A crack of the crucial floor of 1,760 points may see increased profit-taking liquidation pressure and if that happens, the lower 200-day SMA, resting at 1,725 points, would be vulnerable.