KLCI: Momentum turning bullish

by **Cals** Wed 20 Nov 2013, 18:40

Business & Markets 2013

Written by Benny Lee

Wednesday, 20 November 2013 10:55

MARKET confidence is back as the FBM KLCI rose above the 1,800-point immediate resistance level yesterday. The global market rally and the stronger ringgit boosted the market risk appetite. Furthermore, rising crude palm oil prices caused plantation giants like Sime Darby Bhd, Felda Global Ventures Holdings Bhd (FGV), Kuala Lumpur Kepong Bhd (KLK) and IOI Corp Bhd to rally.
Asian markets, which have been uncertain in the past two weeks, started to rally on cues from the US and European markets. Asian markets were also optimistic on China’s economic reform plans.
The KLCI increased 0.7% in a week to 1,807.16 points after rebounding from a low of 1,780 points. Trading volume declined from a daily average of 2.2 billion shares two weeks ago to 1.8 billion shares in the past one week. Gainers in the KLCI component edged decliners 16 to 13. Gainers were led by MISC Bhd (+7.9%), KLK (+6.6%) and FGV (+5.1%) while decliners were led by Malayan Banking Bhd (-2.0%), CIMB Group Holdings Bhd (-1.5%) and UEM Sunrise Bhd (-1.3%).
Developed markets in Asia jumped on China’s optimism while emerging Asean markets were weak. Thailand’s SET Index remained firm in a week at 1,411.57 points and Jakarta’s Stock Exchange Composite Index rose 0.4% to 4,398.34 points. Singapore’s Straits Times Index also increased 0.4% in a week to 3,192.08 points.
Hong Kong’s Hang Seng Index jumped 3.3% higher to 23,657.81 points and China’s Shanghai Stock Exchange Composite Index increased 3.1% to 2,193.13 points. Japan’s Nikkei 225 index increased 2.6% in a week to 14,588.68 points.
Markets in the US and Europe continued to increase but investors are watching out for any clues of US economic stimulus tapering. However, the market may continue to be bullish until January next year when the US central bank decides on the US$85 billion (RM271 billion) a month stimulus programme.
The US Dow Jones Industrial Average rose 1.2% in a week to close at another record high of 15,976.02 points on Monday. In Europe, Germany’s DAX Index also increased to a record high on Monday after increasing 1.3% in a week to 9,225.43 points. London’s FTSE100 Index closed marginally lower at 6,723.46 points.
The stronger euro and yen caused the US dollar index to decline. The US dollar index fell from 81.2 points a week ago to 80.83 points on Monday. The ringgit strengthened from 3.21 to the US dollar a week ago to RM3.18.
Gold continued to decline as equity markets became more favourable. Commodity exchange gold declined 0.5% to US$1,275.20 an ounce. Crude palm oil faced pressure after rebounding last week, declining 1.5% in a week to US$93.64 per barrel. The stronger ringgit put some pressure on the price of crude palm oil, which declined 1.7% in a week to RM2,555 per tonne.

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Daily FBM KLCI chart as at Nov 19, 2013 using Next VIEW Advisor Professional.

Generally, the KLCI is in a bullish trend as the index stays above the longer term 90-day moving average and the Ichimoku Cloud indicator. However, the market moved into a correction in early November and yesterday, the index rose above 1,800 points. This indicates that the index is geared to continue its bullish trend. The rebound in the past few days has formed a new immediate support level at 1,780 points.
Momentum indicators are indicating that the market is turning bullish as indicators like MACD, RSI and Momentum Oscillator have climbed above their mid-levels. The index is currently on a very thick Ichimoku Cloud which indicates very strong support.
Furthermore, the Bollinger Bands have started to expand slightly but we will not see a strong breakout until the index climbs to its top band at 1,826 points.
Weak commodity prices and strong global market performances may continue to give the local market a boost. However, the market may be somewhat cautious as it continues to climb to historical highs and it is near the end of the year. Technically, the market is turning bullish again but the uptrend can only be confirmed if the index can break the resistance level at 1,820 points. With the current momentum, there is a high chance that the index may be pushed to test the resistance level in the near term.
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 judgement or seek professional advice for your investment decisions.

This article first appeared in The Edge Financial Daily, on November 20, 2013.