Outcome of Doha meeting to set the tone

by **Cals** Mon 18 Apr 2016, 01:46

Saturday, 16 April 2016

Outcome of Doha meeting to set the tone

REVIEW: Against a bullish US backdrop the previous Friday and supported by a strong ringgit, many people had expected the local bourse to rally at the start of the week.

But in an unprecedented move, Bursa Malaysia kicked off on an easier note, with the FBM KLCI losing 2.21 points to 1,716.19 on extended consolidation process.
Trading was sluggish, as a mixed performance in the Asia-Pacific region also was not helping.
Sentiment was further undermined by the World Bank’s report trimming its 2016/2017 economic growth forecasts for developing East Asia and Pacific, saying the outlook was clouded by uncertainty over China’s growth prospects.

However, a lower-than-forecast inflation data out of China offered investors a ray of hope Beijing would continue with loose monetary policies, helped provide cushion and limit the downward pressure.
In range-bound session, the key index lost 3.12 points to 1,715.28 on Monday.

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Overnight Dow ended marginally lower the next day as investors turned cautious ahead of the first quarter reporting seasion but crude oil prices sustained the upward thrust, crossing above the US$40 mark a barrel on optimism of output freeze in the upcoming producers meeting in Doha.
In the absence of clarity, most Asian stocks traded slightly firmer in subdued session awaiting a new lead to emerge.
Though the black commodity stood stall due to the sagging US dollar, the local bourse took the cue from the regional peers to stay in consolidation mode.
Throughout the day, the FBM KLCI was trapped between an intra-day high and low of 1,716.66 and 1.711.41, a very tight 5.25 points on bargain hunting interest offsetting profit-taking activity before closing little changed, dropping 0.28 of a point to 1,715.
In spite of the negative finish, winners outnumbered decliners by 390 to 371 on Tuesday.
After a short breather, US equities bounced back strongly the following day, with the Dow jumping 164.84 points to 17,721.25, lifted by energy shares while oil bulls sustained rally to the best level in more than four months on speculations top producers Russia and Saudi Arabia have agreed to freeze output ahead of a much-anticipated producers meeting this weekend.
Riding on the US strength, stocks in the region rose in the wake of fresh buying.
As expected, Bursa Malaysia edged up on better sentiment, boosted further by the solid ringgit and in line with overseas gains, the FBM KLCI chalked up 8.11 points to 1,723.11 in active business in mid-week.
But sadly, market activity was generally muted thereafter, up 0.67 of a point to 1,729.13 on Thursday and an extra 4.21 points to 1,727.99 yesterday, as investors adopt a cautious stance, with oil producers meeting getting nearer.
Statistics: For the week, the principal index added 9.59 points, or 0.6% to 1,727.99 yesterday, versus 1,718.40 on April 8.
Weekly turnover stood at 8.17 billion shares worth RM8.651bil, against 7.776 billion units valued at RM9.6bil changed hands the previous week.
Outlook: The performance of Bursa Malaysia was very much the same as the prior week, undergoing consolidation in a sideways pattern but with a slight upward bias, although the FBM KLCI managed to set a new high for this year.
Though ringgit was holding firm and a bullish breakout was sighted in crude oil prices, investors were decisively cautious, with the upcoming oil producers meeting in Doha, tempering risk appetite.
Obviously, the conclusion of the meeting this weekend is important, as it will serve as a game changer for the local bourse next week.
If the outcome is favourable, it will certainly help justify the recent rally in crude oil prices above the US$40 a barrel level and probably set the stage for more advances in the black commodity in the near-term, which will bode well for equities and the ringgit going forward.
On the contrary, should there be anything constructive achieved among the oil producers, it is bound to hurt the overall sentiment, not only for crude oil but also equities and in this case, Bursa Malaysia will most likely retreat on correction in the wake of profit-taking liquidation pressure.
Technically, except for the daily moving average convergence/divergence histogram, which is on the slide, other indicators are positive, suggesting shares on Bursa Malaysia may trade higher in the immediate term.
A breach of the 1,730-point barrier will propel the key index up to the 1,750-point level or the upper resistance of 1,770 points. An additional hurdle is expected at 1,780 points, followed by the 1,800-point psychological level.
Initial support is envisaged at 1,710 points, followed closely by the 50-day SMA of 1,693 points. A crack of the 1,670-point floor will have a negative impact on the outlook of the market.