FBM KLCI still faces resistance

by **Cals** Thu 14 Jul 2016, 04:40

FBM KLCI still faces resistance

By Benny Lee / The Edge Financial Daily | July 13, 2016 : 10:33 AM MYT
This article first appeared in The Edge Financial Daily, on July 13, 2016.

The market closed marginally lower in a short trading week last week. Market sentiment was weak as global market performances were mixed and prices of commodities, especially crude oil and palm oil, fell. The benchmark FBM KLCI declined only 0.1% in a week to 1,644.54 points.

The average daily trading volume last week was only one billion shares compared with 1.4 billion shares two weeks ago. The average daily trading volume declined from RM1.7 billion to RM1.2 billion. The low volume showed that most investors were still on holiday.

Foreign institutions were net buyers last week as the stronger ringgit last Monday boosted their appetite. Net buy from foreign institutions was RM94 million while net sell from local retail was RM101 million. Net buy from local institutions was RM7 million. The ringgit was firm against the US dollar from the previous week at RM4.00 per US dollar.

For the FBM KLCI, decliners outpaced gainers three to two. Top gainers for the week were British American Tobacco (Malaysia) Bhd (+3.7% in a week to RM54.42), Hong Leong Financial Group Bhd (+2% to RM15.30) and CIMB Group Holdings Bhd (+1.9% to RM4.39). Top decliners were UMW Holdings Bhd (-5.3% to RM5.38), SapuraKencana Petroleum Bhd (-2.8% to RM1.39) and Sime Darby Bhd (-2.5% to RM7.31).

Market performances in Asia were mixed. China’s Shanghai Stock Exchange Composite increased 1.9% in a week to 2,989.25 points last Friday. Singapore’s Straits Times rose marginally higher to 2,847.04 points. Japan’s Nikkei 225 index declined 3.9% in a week to 15,106.98 points and Hong Kong’s Hang Seng Index fell 1.1% to 20,564.17 points.

The US and Europe continued their bullish trend after a correction two weeks ago. The US Dow Jones Industrial Average increased 1.1% in a week to its highest in 13 months at 18,146.74 points last Friday. London’s FTSE100 increased 0.2% to 6,590.64 points, the highest in 11 months. However, Germany’s DAX Index declined 1.5% to 9,629.66 points.

The US dollar strengthened against major currencies. The US Dollar index futures rose from 95.7 points to 96.3 points last Friday. Gold rose to its 28-month high. COMEX Gold increased 1.7% in a week to US$1,367.40 an ounce. Crude oil (Brent) declined 7% in a week to US$46.76 per barrel. Crude palm oil on Bursa Malaysia fell 5.1% in a week to RM2,238 per tonne.

The weak market performances last week show that there was resistance. Immediate resistance is at around 1,665 points. The weekly chart shows uncertainty. Nevertheless, the FBM KLCI is still bullish above the short-term 30-day moving average. However, the index is still below the Ichimoku Cloud and the long-term 200-day moving average. This indicates that the long-term trend is still bearish.

The top band of the Ichimoku Cloud is at 1,670 points and the long-term 200-day moving average is at 1,665 points. Hence, the immediate resistance level is between 1,665 and 1,670 points. The FBM KLCI needs to overcome the resistance to build market confidence and the trend to turn strongly bullish.

Despite the resistance, the market is still being supported and like last week, we continue to expect the market to bargain-hunt after the holidays in this second half of the year. A breakout above 1,670 points could bring the index to test the highest levels this year at 1,720 points. However, if the index fails to break above this level, then we are going to expect further correction.

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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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