KLCI may remain slightly bullish this week

by **Cals** Wed 26 Feb 2014, 17:35

Business & Markets 2014

Written by Benny Lee

Wednesday, 26 February 2014 09:57

SHARES in Bursa Malaysia remained slightly bullish in the past week. The market was somewhat cautious, as we had expected last week but sentiment is still bullish.

The positive performance in global markets and slightly stronger ringgit against the US dollar boosted some market confidence. The FBM KLCI rose 0.5% in a week to 1,833.75 points after trading in a narrow range between 1,820.59 and 1,833.80 points.

Last week, I expected the index to trade between 1,809 and 1,830 points. This shows that the market is a little more bullish than expected.

Average trading volume for the past one week was slightly higher at 3.1 billion shares as compared to 2.9 billion shares two weeks ago. Average trading value was RM2.3 billion and this indicates that most of the trading was focused on penny stocks.

Last week, net sellers in Bursa Malaysia continued to be foreign institutions at RM93.5 million while local institutions were net buyers at RM82.6 and the remaining net buyers were local retail. In the KLCI, gainers beat decliners 16 to 9 and were led by IOI Corp Bhd (+8.7%), Sime Darby Bhd (+2.4%) and Felda Global Ventures Bhd (+2.2%) while decliners were led by Genting Bhd (-1.8%), Tenaga Nasional Bhd (-1.2%) and MISC Bhd (-1.1%).

Global markets continued to rally higher last week. Singapore’s Straits Times Index rose 1.1% in a week to 3,103.62 points. Hong Kong’s Hang Seng Index declined 1.2% to 22,317.20 points on China’s bearish performance. China’s Shanghai Stock Exchange Composite Index fell 4% in a week to 2,034.22 points. Japan’s Nikkei 225 Index rose 1.4% in a week to 15,051.60 points.

On Monday, the US Dow Jones Industrial Average increased only 0.3% in a week to 16,207.14 points. London’s FTSE100 Index increased 1.9% to 6,865.86 points, its highest level in 14 years. German’s DAX Index increased only 0.5% to 9,708.94 points.

Prices of commodities continued to rise in the past week as the US dollar remained firm.

Commodity Exchange gold rose 0.6% in a week to US$1,336.60 (RM4,384) an ounce. New York Mercantile Exchange crude oil increased 1.9% to US$102.85 per barrel. The US dollar index was firm in a week at 80.16 points.

The ringgit slightly strengthened against the US dollar from 3.30 per US dollar to 3.28. Crude palm oil futures continued to climb slightly higher, rising 0.7% in a week to RM2,733 per tonne.

The KLCI continues to stay in a bullish mode after climbing above the short term 30-day moving average two weeks ago and managing to stay above this level despite the whipsawing in the past two weeks. The index has so far retraced 50% from the downward correction since early January.

The 61% Fibonacci retracement level is at 1,840 points and the KLCI may still remain bearish if it stays under this level.

Furthermore, the KLCI is in the Ichimoku Cloud, which currently ranges between 1,830 and 1,850 points.

Rising momentum indicators like the RSI, MACD and Momentum Oscillator indicate that the momentum is bullish. The MACD maintained above its trigger line or nine-day moving average and is still increasing. The Bollinger Band is starting to strongly expand, indicating a build-up in bullish momentum. However, the index still did not manage to climb to the top band. Momentum will be very bullish if the index can hit the top band of the Bollinger Bands.

We are probably going to see a cautiously bullish market this week. The index may continue to climb but may find resistance at 1,840 points. However, a breakout above this resistance level means that the market is still bullish and there is a high chance that it can climb to historical highs in the near term.

Continued selling by foreign institutions in the local market and mixed performances in global markets may damper the bullish momentum. Henceforth, I am expecting the KLCI to trade sideways between 1,820 and 1,840 points.

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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 February 26, 2014.