KLCI — Bullish momentum building up

by **Cals** Thu 11 Sep 2014, 08:26

Business & Markets 2014

Written by Benny Lee

Wednesday, 10 September 2014 10:56

THE market inched higher in the past one week, supported by bullish market performances globally. However, volume slightly declined as a sign of the market being a little cautious. Local retail market confidence continued to be weak after low-capped stocks which have recorded 52-week highs when volume was exceptionally high pulled back in the past few weeks. While foreign institutions were distributing, local institutions have been supporting the market and this lifted the market barometer. The FBM KLCI increased 0.3% in a week to 1,874.12 points yesterday.

Average daily trading volume fell from 3.2 billion shares two weeks ago to 2.8 billion in the past one week. Average trading value was RM2.1 billion compared with RM2.5 billion two weeks ago. Total market valuation declined RM2 billion to RM1,778 billion from the previous week. The volume showed that the market volume is still dominated by lower-capped stocks, thus, indicating that there was not much trading on blue-chip stocks.

The market was supported by local institutions. Net buying by local institutions from Monday to Friday last week was RM192.9 million. Foreign institutions and local retail investors were net sellers at RM61.2 million and RM131.7 million respectively. In the KLCI, gainers outpaced decliners 8 to 5. Gainers were led by AMMB Holdings Bhd (+5.4%), Hong Leong Financial Group Bhd (+4.8%) and IHH Healthcare Bhd (+2.9%), while decliners were Astro Malaysia Holdings Bhd (-5.9%), Genting Malaysia Bhd (-1.4%) and RHB Capital Bhd (-1.3%).

Markets were generally bullish in the past one week, led by the bullish performances in China and Germany markets. Hong Kong’s Hang Seng Index rose 1.8% in a week to 25,190.45 points on Monday. China’s Shanghai Stock Exchange Composite Index rose 2.7% to 2,326.53 points, the highest level in 18 months. Japan’s Nikkei 225 increased only 0.5% to 15,749.15 points, the highest in seven months. The US Dow Jones Industrial Average increased marginally higher to 17,111.42 points on Monday. London’s FTSE100 Index increased only 0.1% in a week to 6,834.77 points, but Germany’s DAX increased 2.9% to 9,758.03 points.

There are no signs of weakness to the bullish US dollar. The US dollar index, which measures the US dollar against a basket of major currencies, increased from 82.77 points a week ago to 84.37 points, the highest level in 14 months. This has put pressure on gold prices, which fell 2.5% in a week to US$1,256.30 (RM3,987) an ounce in the Commodity Exchange. Crude oil declined 2.8% to US$93.12 per barrel. The weak dollar against the ringgit helped crude palm oil (CPO) to rebound. CPO futures in Bursa increased 4% in a week to RM2,034 per tonne.

Technically, the KLCI is still in a sideways correction mode as it stayed with the immediate support and resistance levels at 1,860 and 1,880 points. It became slightly bullish as the index moved towards the resistance level. Furthermore, the index has climbed above the short-term 30-day moving average. However, the index is still below the Ichimoku Cloud indicator. The contrasting indication between these two indicators therefore suggests that the trend is still directionless.

Momentum indicators such as the RSI and Momentum Oscillator suggest that the bullish momentum will continue to build up. The indicators have climbed above their mid-levels, indicating that the momentum is bullish in the short term. Furthermore, the MACD continued to stay above its trigger line since three weeks ago. In addition, the index is trading above the middle band of the Bollinger Bands indicator but the bands are still contracting, indicating a weak bullish trend.

Despite the uncertainty, the technical indicators show that the bullish momentum is building up. However, the index must break the immediate resistance level, which is at 1,880 points, in order to boost market confidence and turn the trend to bullish. The market is expected to remain directionless as long as the index stays between the immediate support level at 1,860 and the immediate resistance level. The sector to watch is plantation as prices are oversold after CPO prices declined to its lowest level in more than five years. The rebound in the past one week provides an indication that the price may have bottomed out.

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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 September 10, 2014.[/size]