Growing downside risks

by **Cals** Sun 15 Nov 2015, 02:44

Saturday, 14 November 2015

Growing downside risks

REVIEW: Bursa Malaysia’s benchmark FBM Kuala Lumpur Composite Index (FBM KLCI) lost 1.82 points at the start of the week, ignoring a moderately higher Wall Street the previous Friday, as investors fretted about the prospects of the Federal Reserve raising interest rates as soon as next month after US non-farm payrolls growth in October came in better-than-expected and unemployment figures fell to the lowest level since April 2008.
The sliding commodity prices, an uninspiring performance of the Asian markets and a stronger greenback against the ringgit, meanwhile, weighed on the local sentiment.
While awaiting for a new lead to emerge, the local bourse flirted between a pretty tight 5.53 points throughout, mostly in the negative territory before a last minute push in select heavyweights helped navigate the key index above the flat line, up 0.41 point to close at the day’s high of 1,686.32 on Monday.
Bursa was shut on Tuesday for a holiday. While we were celebrating Deepavali, US markets took an unexpected turn for the worse as investors braced for an interest-rate hike and crude oil prices skidded for the fourth straight day due to supply glut.
In Asia, major indices led by Hong Kong’s Hang Seng Index slumped as the latest poor trade data filtered out from China stoked concerns over weakening global growth.
Bursa was already treaded cautiously since the Fed opened the door to a rate increase in December a week earlier.
Combined with the negative overseas backdrop, they brought about a “perfect storm” and in line with expectations, the local bourse turned sour on resumption of business after a one-day break, gaping down a significant 13.01 points to 1,673.10 at the opening bell, playing catch-up.
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Shortly after, the FBM KLCI moved downwards to touch a low of 1,657.88 in mid-morning, plunging a huge 28.23 points on intra-day basis before some bargain hunting helped cushion the downside and somewhat guided the market into sideways trading for the rest of the day.
Blue chips bore the brunt of selling, tearing the key index down 20.79 points to 1,665.32 in mid-week.
Thereafter, continuous profit-taking selling offsetting bargain hunting dominated the floor in the absence of fresh market-stimulating leads.
In lacklustre trade, the local bourse eased 2.12 points to 1,663.20 on Thursday and an extra 4.29 points to 1.658.91 yesterday, hurt by bearish tone in global equities.
Statistics: On a weekly basis, the major index shed 26.79 points, or 1.6% to 1,658.91 yesterday, against 1,685.70 on Nov 6.
Turnover for the four-day holiday-curtailed week amounted to 8.789 billion units worth RM7.993bil, compared with 12.54 billion shares valued at RM10.884bil changed hands during the regular previous week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were on the slide after triggering a short-term sell near the 80% level on Monday.
Also on the downtrend, the 14-day relative strength index settle at the neutral area of 30 points, down from a reading of 54 earlier this month.
Mirroring the trend, the daily moving average convergence/divergence (MACD) histogram continued to expand negatively against the signal line. It had issued a sell late last month and now in danger of going under the zero threshold.
Weekly indicators were deteriorating, with the slow-stochastic momentum index falling and the upward momentum of the MACD slowing significantly.
Outlook: Bursa tripped back into correction, with the FBM KLCI violating the lowest 50-day simple moving average (SMA) during intra-week session.
Apparently, there were simply too many unfavourable issues weighing on the local sentiment, such as the lingering concerns the Fed may hike rates as soon as next month.
The other factor is global growth as data out from China shows no sign of its economy picking up.
Meanwhile, ringgit remains fragile although it has turned sideways.
Light sweet crude has broken down from the “rectangular box” and in great danger of suffering more beatings going forward.
Elsewhere, the key index is now pressured by the falling 21-day SMA, also the 14-day SMA and as long as the two lines are intact, the local bourse has no chance of moving higher but heading lower, or the best, sideways pattern.
Technically, indicators are weakening, suggesting cautious mood is likely to prevail this week, unless fresh catalyst emerges.
To the upside, the FBM KLCI will now be facing initial resistance at the 1,680 points, followed by the 1,690 points and the next, at the 1,700-point psychological barrier.
The next upper strong hurdle is pegged at the 200-day SMA of 1,735 points.
The immediate support is seen at the 1,635-1.637 points band. A crack of the crucial 1.590-1,600 points range may see the slide accelerating.