Focus shifts to lower liners ahead of CNY BY K.M LEE

by **Cals** Mon 13 Jan 2014, 02:15

Published: Saturday January 11, 2014 MYT 12:00:00 AM
Updated: Saturday January 11, 2014 MYT 8:25:37 AM
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REVIEW: Riding on the strength of Wall Street overnight, Bursa Malaysia kicked off the second week of the new year on a positive note, with the FBM KL Composite Index (FBM KLCI) rising 1.11 points to 1,835.85, rebounding from a two-day loss amid renewed bargain-hunting interest.
Quality issues led the way in early deals, but sadly, the momentum was short-lived, as local funds were selling into strength, simply because an uninspiring performance in the Asia-Pacific region was not supportive of a rally.
In the absence of fresh market-stimulating leads on the horizon, the local bourse succumbed to mild pressure to trade in negative territory for the most part of the day, albeit within a modest band before closing down 5.56 points to 1,829.18 on Monday.
After a short pause, overnight Wall Street resumed the downtrend, shedding 44.89 points to 16,425.10 the next day, with a mixed bag of economic reports weighing on the US market.
Elsewhere, caution on China’s economic prospects kept most Asian stocks under pressure on Tuesday.
Tracking the lacklustre overseas trend, quality issues on the local bourse once again flirted within a moderate band on extended consolidation process.
But unlike the index-linked counters, most second and lower liners bucked the trend in active volumes, as retail players increased their buying appetite, looking for short-term money ahead of the lunar new year.
Apparently, the two-tier market was clearly displayed on the scorecard. Despite the FBM KLCI easing 4.07 points to 1,825.11, the overall breadth was positive, with winners beating decliners by 435 to 382 respectively that day.
Then, world equities got a respite, led by Wall Street, firming 105.84 points to 16.530.94 in overnight session, as a sharp drop in the US trade deficit and upbeat German data, suggesting strengthening economic fundamentals in both US and Europe, helped boost investors’ hunger for risky assets.
In line with global rebounds, the local bourse staged a relief recovery, climbing as high as 1,838.39 during intra-day session before paring gains in late trade to settle up 6.19 points to 1,831.30 in mid-week.
Thereafter, profit-taking activity re-emerged and dominated the floor due to lack of conviction.
As usual, blue chips suffered amid foreign liquidation, dragging the FBM KLCI down 3.09 points to 1,828.21 and an extra 1.60 points to 1,826.61 on sustained selling yesterday.
Statistics: On a weekly basis, the major index declined 8.13 points, or 0.4% to 1,826.61, compared with 1,834.74 on Jan 3.
Weekly turnover stood at 9.143 billion shares valued at RM9.663bil, versus 5.343 billion units worth RM5.908bil done during the four-day holiday-curtailed previous week.
Technical indicators: The oscillator per cent K had climbed above the oscillator per cent D of the daily slow-stochastic momentum index to trigger a short-term buy at the grossly oversold area on Thursday, but it could not be confirmed for now, as the two oscillators were still flirting at the bearish territory.
The past week saw the 14-day relative strength index rebounding from a reading of 35 on Tuesday to a high of 42 the next day before reversing down to close at the 36 points level yesterday.
In addition, the daily moving average convergence/divergence histogram continued to expand negatively against the daily signal line to stay bearish. It had issued a sell on Jan 3.
Weekly indicators deteriorated the past week, with the weekly slow-stochastic momentum index sustaining declines and the weekly MACD in danger of slipping under the weekly trigger line.
Outlook: Bursa Malaysia remained in consolidation mode, with the FBM KLCI sliding deeper on persistent profit-taking activity in select blue chips the past week.
Based on the daily chart, the recent weakness of the market has resulted in the 14-day simple moving average (SMA) staging a negative crossing against the 21-day SMA.
In addition, the key index is in great danger of slipping below the 50-day simple moving average of 1,820 points, a fairly important line, with investors continuing to fret about the impact of Fed tapering.
A crack is likely to see the local bourse moving further away from the all-time peak of 1,882.20 on extended correction process.
If that happens, the 1,800-point psychological level and the 100-day SMA, resting on 1,794 points, would be vulnerable and the lower 200-day SMA of 1,774 points will be much weaker.
Technically, indicators are frail, suggesting blue chips may stay in correction mode this week, but there are signs of investors’ focus shifting to the second and lower liners ahead of the Chinese New Year.