Market continues to stay buoyant

by **Cals** Thu 19 Jun 2014, 03:10

Business & Markets 2014

Written by Benny Lee

Wednesday, 18 June 2014 09:44

THERE was no follow through to last week’s FBM KLCI breakout of the immediate resistance at 1,870 points. However, the index still managed to stay above this level.

Market sentiment was weak as global markets including the US, which has been making historical highs, started to move into a correction. Possible US strike on Iraq and the Ukraine-Russia conflict depress market’s appetite for risks.

On Bursa Malaysia, trading volume was firm as compared with the previous week. Local market players continued to distribute while foreign institutions provided the support. The KLCI pulled back and closed only 0.1% lower from the previous week at 1,874.6 points. The average daily trading volume in the past one week was firm at 1.4 billion shares while the average daily trading value was RM1.6 billion, the same as the previous week’s.

Despite the slight decline in the KLCI, total market valuation increased by RM2 billion from last week to RM1,750 billion on Monday.

Foreign institutions were the sole net buyers on Bursa Malaysia, with net buying totalling RM348.7 million. Net selling by local institutions was RM225.6 million while selling by local retail investors came to RM123.1.

In the KLCI, decliners outpaced gainers 15 to 13 in the past one week. The gainers were led by British American Tobacco (M) Bhd (+9.9%), SapuraKencana Petroleum Bhd (+5.7%) and IOI Property Group Bhd (+3.2%) while decliners were led by YTL Corp Bhd(-4.8%), PPB Group Bhd (-3.1%) and IOI Corp Bhd (-2.9%).

Globally, markets pulled back from their bullish performances two weeks ago. Singapore’s Straits Times Index declined 0.6% in a week to 3,274.44 points yesterday. Hong Kong’s Hang Seng Index fell 0.5% to 23,203.59 points. However, China’s Shanghai Stock Exchange Composite Index increased 0.7% to 2,066.70 points. On Monday, the US Dow Jones Industrial Average declined 1% in a week to 16,781.01 points after pulling back from its historical high last week. London’s FTSE100 Index declined 1.8% to 6,754.64 points, the lowest level in 1½ months. Germany’s DAX Index fell 1.6% to 9,883.98 points.

The bullish momentum of the US dollar index took a breather last week. The US dollar index declined from 80.78 points to 80.50 points. The uncertainty in the equity markets boosted gold prices. Commodity Exchange gold rose 1.6% in a week to US$1,271.80 (RM4,107.91) an ounce.

Crude oil in the New York Mercantile Exchange rose 2% in a week to US$106.58 per barrel. The ringgit was firm against the US dollar at 3.22. Crude palm oil on Bursa rose 2.1% at RM2,436 per tonne.

The KLCI was buoyant last week and traded sideways within the support and resistance levels of 1,860 and 1,880 points. Technically, the index had turned into an uptrend as it broke and stayed above the short-term 30-day moving average and the Ichimoku Cloud last week. However, the short-term 30-day moving average has been whipsawed for the past one month and this can continue to happen when the market lacks direction.

Momentum was flat in the past few weeks week but generally we do not see any selling strength after the past one week’s performance. Momentum indicators like the RSI and Momentum Oscillator continued to whipsaw at the mid-level and did not show any clear direction.

Furthermore, the Bollinger Bands remained firm while the MACD indicator was below its moving average or trigger line. These momentum indicators show that the market is probably going to stay sideways.

Despite the US market pulling back, the local market sentiment may be supported by strong China market performance. Furthermore, the Asian markets are more attractive now that the US and European markets are at historical highs. This may be the time for Asian markets to shine.

With interest rates remaining low in Europe, we may see some hot money coming into Asia. However, the Malaysian market has always been defensive and we may only see some benefit from the strong regional market performance.

Henceforth, we expect the KLCI to remain in a sideways correction with a bullish bias. The index may test the historical high at 1,887 points if it can break above the immediate resistance level at 1,880 points. Support level remains at 1,860 points.

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.

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This article first appeared in The Edge Financial Daily, on June 18, 2014.[/size]