Market still well supported

by **Cals** Thu 09 Jun 2016, 02:32

Market still well supported

By Benny Lee / The Edge Financial Daily | June 8, 2016 : 10:19 AM MYT
[size=12][You must be registered and logged in to see this image.]Daily FBM KLCI chart as at June 3, 2016.

This article first appeared in The Edge Financial Daily, on June 8, 2016.

The market is still being supported well despite the weaker ringgit and continuous selling from foreign institutions. The FBM KLCI started on a bearish note last week, but rebounded towards the end to close marginally lower from the previous week. The stocks’ performances in the first quarter of 2016 were generally weaker than expected. The FBM KLCI closed marginally lower from the previous week at 1,636.46 points last Friday.

Trading volume remained firm compared to the past few weeks at 1.8 billion shares. However, the average trading value jumped from RM1.8 billion to RM3 billion. Nearly RM7 billion was traded last Tuesday alone when the index fell.

Selling pressure continued to come from foreign institutions. Net selling from foreign institutions was RM1.2 billion and net buyers were local institutions. Local retailers were even. Therefore, the support came from local institutions. The ringgit strengthened after a sharp decline in the US dollar last Friday, but on a week-to-week basis, the ringgit was firm at RM4.09.

In the FBM KLCI, decliners beat gainers eight to five. The top gainers for the week were SapuraKencana Petroleum Bhd (+5.7% in a week to RM1.68), Axiata Group Bhd (+3.2% to RM5.51) and CIMB Group Holdings Bhd (+2.8% to RM4.49). The top decliners were PPB Group Bhd (-3.6% to RM16.14), UMW Holdings Bhd (-2.5% to RM5.05) and Genting Bhd (-2.1% to RM8.34).

Most markets in Asia rebounded last week. China’s Shanghai Stock Exchange Composite Index rebounded and closed 4.1% higher in a week at 2,938.18 points last Friday. Hong Kong’s Hang Seng Index increased 1.8% in a week to 20,947.24 points and Singapore’s Straits Times Index increased only 0.2% to 2,809.23 points. However, Japan’s Nikkei 225 declined 1.1% to 16,642.23 points.

US and European markets were slightly bearish last week after US Federal Reserve chief Janet Yellen hinted at an interest rate increase last week. The US Dow Jones Industrial Average declined only 0.4% in a week to 17,807.06 points last Friday. Germany’s DAX Index declined 1.8% in a week to 10,103.26 points, and London’s FTSE 100 Index fell 1% to 6,209.63 points.

Disappointing job reports caused the US dollar to tumble. In a week, The US Dollar Index futures fell from 95.5 points from the previous week to 94 points last Friday. Gold rebounded sharply last Friday after falling throughout last week and the price (commodity exchange gold) increased 2.6% to US$1,244.50 (RM5,052.67). Crude palm oil on Bursa Malaysia increased 4.2% in a week to RM2,665 per tonne.

If you still remember, last week I mentioned that the market would still be in correction as long as the FBM KLCI remained in the sideways support and at resistance levels of between 1,610 and 1,640 points. Technically, the trend is still bearish below the downtrend line and short-term 30-day moving average. However, momentum indicators like the Relative Strength Index and moving average convergence divergence show that market confidence is getting stronger.

The FBM KLCI is below the Ichimoku Cloud indicator, but is currently below a thin cloud. This indicates that the FBM KLCI is set to move into correction after staying sideways for the past one month. Furthermore, the Bollinger Bands have become very narrow, and hence a strong movement is expected if the bottom top band is broken.

The market may rebound or continue its bearish trend and this depends at which level the FBM KLCI breaks. If the index breaks above the resistance level at 1,640 points, then we expect the index to at least test the short- and long-term 30-day and 200-day moving averages at 1,660 points. However, a breakout below the support level at 1,610 points could push the FBM KLCI lower to the next support at 1,510 points. Let’s see at which level the FBM KLCI breaks, but there is a higher chance for the index to rebound as it is now closer to test the resistance level.

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Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at[email=bennylee.kl@gmail.com][size=15][You must be registered and logged in to see this link.][/email]. 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.[/size]
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