Band trading likely to stay

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REVIEW: Bursa Malaysia kicked off the week on the positive side, with the FBM KLCI rising 1.6 points to 1,630.56, lifted by a moderately steadier crude oil prices, which saw the commodity advancing 62 cents to US$51.68 per barrel the previous Friday following the recent Opec decision to cut output to rein in a global glut.

However, gains on the home front was limited as a slightly easier overnight Wall Street reminded the local players to exercise caution in their trading approach.

Meanwhile, most regional markets drifted in the red zones amid worries about political instability in the eurozone on news that Italian Prime Minister Matteo Renzi had resigned following a crushing referendum defeat.

Given the limited support from investors, the local market was subdued and range-bound in directionless trade until the very last minute where a fresh bout of selling emerged unexpectedly and dragged the key index down to finish at the day’s low of 1,624.97, losing 3.99 points in lacklustre session on Monday.

Though US stock index futures tracked the Monday’s easier regional trend, the cash market Wall Street ignored the Italy jitters and moved into the positive territory on fresh buying momentum, sending the Dow up 45.82 points to settle at a new record of 19,216.24 in overnight trade, boosted by strong economic data.

As expected, Asian equities followed overnight US equities, rebounding from the previous day’s losses as worries about Italy’s political uncertainty faded.

The local bourse, despite opening a shade below the flat line, quickly moved over to the positive territory on the back of a bullish overseas tone, underpinned further by a firmer oil prices on news Opec had invited non-members to Vienna in an effort to secure additional output cuts to curtail supply.

A slightly stronger ringgit against the greenback added to the upbeat mood.

However, unlike regional peers, the broad-market sentiment on Bursa Malaysia was somewhat cautious and interest was focused on certain blue chips.

In spite of the FBM KLCI advancing 4.76 points to 1,629.73, decliners beat winners by 409 to 304 while 369 counters traded unchanged on Tuesday.

Global equities sustained the upward thrust on Wednesday, led by Wall Street setting a new record closing in overnight amid follow-through interest.

But trading volumes were thin as overall there was a sense of caution ahead of policy decisions from the European Central Bank on Thursday and a likely interest rate hike by the US Federal Reserve later next week.

Bursa Malaysia fluctuated from an intra-day high of 1,634.20 in early business to a low of 1,627.86 in mid-morning before crawling back in the afternoon to finish up 2.74 points to 1,632.47 in cautious mood.

Again, the overall market breadth was ugly, with 414 decliners versus 283 advancers in mid-week.

Nevertheless, market sentiment improved slightly the following day after Wall Street roared to another record level on aggressive buying amid growing optimism about the prospects of Donald Trump’s new administration.

Adding to the positive tone, most regional markets rose on persistent bargain hunting buying and in line with overseas gains, the FBM KLCI chalked up some 11.28 points to 1,643.75, led by the blue chips on foreign nibbling on Thursday.

But sadly, investors were quick to book profit despite Wall Street doing fairly well overnight and losses in the quality issues pulled the key index down 2.33 points to 1,641.42 yesterday.

Statistics: Week-on-week basis, the major index firmed 12.46 points, or 0.8% to 1,641.42 yesterday, compared with 1,628.96 on Dec 2.

Total turnover for the week shrunk to 5.6 billion units worth RM7.255bil, against 7.399 billion shares valued at RM9.443bil done a week ago.

Outlook: Bursa Malaysia steadied, with the FBM KLCI registering gains for the third straight week amid continuous bargain hunting interest.

Unlike certain major index in the Asia-Pacific region, such as Japan’s Nikkei 225-share average hitting the best level in more than 12 months, Bursa Malaysia had certainly underperformed, as the upward momentum on the domestic front was small and trading was evidently subdued, with the soft ringgit against the greenback weighing on the local sentiment.

Going forward, the prevailing market sentiment and investors’ risks appetite are not expected to change much in the immediate term. While the government is doing everything to arrest the slide of the ringgit and even though the market may still climb in the short-term due to year-end “window dressing” activity, any upward thrust is not sustainable, at least for now, simply because the most important ingredient is missing.

This may mean limited upside potential until we see trading volumes expand sharply and positively.

Technically, the daily and weekly indicators are opposing each other and given the tricky reading, band trading is likely to prevail this week. To the upside, resistance is at 1,640 points, followed by the 1,680 points and the next, at the 1,700 points psychological level.

Crucial support is set at 1,600 points, of which a breakdown will have a negative impact on the market.