Volatility to return to Bursa

by **Cals** Tue 01 Sep 2015, 19:04

Volatility to return to Bursa

KUALA LUMPUR: After last week’s rebound with four consecutive days of gain, Bursa Malaysia is likely to see the return of volatility in the near term, according to analysts, adding that external factors would dictate the market direction.
The local bourse is expected to trend in tandem with the regional markets that would take the cue from the performance of Wall Street, said a fund manager, noting that the same slew of factors, namely “guess” the timing of the United States interest rate hike, the health of China’s and the global economy, as well as crude oil prices.
Most Asian markets closed lower yesterday with the Shanghai bourse leading the drop amid talks that the Chinese government might end its intervention to stem the fall in the equity markets there.
The Financial Times reported over the weekend that the Chinese authorities would stop its share purchase, which had sparked some panic selling.
Dealers expect profit-taking to set in when Bursa resumes trading today after the long weekend National Day break.
CIMB ([You must be registered and logged in to see this image.] Financial Dashboard) research head Terence Wong expects the FBM KLCI to remain volatile during the current quarter and that selling pressure may re-emerge. “It (KLCI) is likely to recover in the fourth quarter when all the bad sentiments are countered in,” he said.
Commenting on the recently concluded results season, Wong said the earnings numbers were “mildly disappointing”. “So far, the numbers are not severely disappointing; it is just mildly disappointing. Although there will be some revision in earnings per share, the set of results were not too bad,” he said.
RHB Research head of research Alexander Chia said the direction of the key index is still much dependent on the movement of crude oil prices. “The index will track the oil price and they are correlated,” he said.
Chia said the market is still lacking a catalyst, while the domestic and external headwinds remain.
The KLCI closed in positive territory for the fourth consecutive day after the local bourse slipped into an oversold position. The benchmark managed to climb above the 1,600 level to close at 1,612.74 points last Friday as local institutional funds started nibbling on stocks that have been battered down lately.
Commenting on this, Malacca Securities Sdn Bhd technical analyst Loui Low said the key index is likely to trade higher in the next two weeks as the technical chart indicates that the KLCI has entered into a short-term correction period.
“The five-minute chart is showing some divergence signals. Once it crosses over the 1,600 level, then we are due for a correction.
“There is also a mild correction at the 30-minute chart, so we are looking at a short-term correction,” he told the digitaledge DAILY over the phone.
Although there will be some profit-taking activities taking place in the next two weeks, he said the profit-taking should be more to the healthy side and would be for two or three days.
With the bullish signs, he expects the KLCI may rise as high as 1,660.
“But should it breach the 1,600 level, then it may dive to a low of 1,560. If the immediate support level is crossed, then it may fall further to 1,500,” he explained.

This article first appeared in digitaledge Daily, on September 1, 2015.