More upside in store

  • Business
  • Saturday, 20 Apr 2013

REVIEW: The bulls on Bursa Malaysia had a slow start to the week, with the bellwether FBM Kuala Lumpur Composite Index (FBM KLCI) shedding 0.37 points to 1,698.16 on consolidation.

Sentiment was cautious, weighed down by a slightly lower Wall Street and a plunge in commodity prices overnight, spooked by a gloomy reading of US consumer data and poor retail sales.

A frail showing in the Asia-Pacific pending the release of a batch of Chinese data, added to the downbeat note.

But unlike the peers in the region, dropping between 0.2% and 1.6%, the key index at home was generally trapped within a narrow band, as sporadic bargain hunting by foreign funds helped cushion the slide.

In range-bound trade, the key index flirted between an intra-day high and low of 1,702.88 and 1,696.95 respectively, a pretty tight 5.93 points throughout before ending at 1,697.77, losing 0.76 point on Monday.

Overnight Wall Street worsen with commodities suffering a broad sell-off the next day amid worries about the health of the world's largest economy, exacerbated by reports of two explosions in Boston near the finish line of the Boston Marathon.

In line with the negative sentiment in the United States, Asian stocks tumbled on follow-through selling, depressed further by weaker-than-expected data from China.

As expected, the local bourse reacted accordingly, with the FBM KLCI swooning to a low of 1,688.70 in early deals, with blue chips topping the losers list.

But just when the market appeared in great danger of extending the fall, foreign funds emerged unexpectedly from the sidelines and started bidding up the quality issues.

Apparently, their action helped lift the market back into the positive territory, up 2.76 points to 1,700.53 on Tuesday.

A day after the meltdown, most global equities and commodity prices staged a relief rebound, as positive American corporate earnings and optimism that the Federal Reserve would keep its stimulus plan in place encouraged investors to seek bargain hunting.

On the back of better overseas sentiment, shares on Bursa extended the upward thrust on continuous support from big funds.

As usual, blue chips led the winners board. Elsewhere, second and lower liners also were steadier on greater retail participation, driving the key index up 10.44 points to 1,710.97 in mid-week, a record level on closing basis.

Thereafter, profit-taking activity kicked in and losses in the quality issues pulled the FBM KLCI down 4.71 points to 1,706.26 on Thursday.

Yesterday, the local bourse eked out a small positive note, up 0.02 point to 1,706.28 amid late bargain hunting buying, aided by a steadier regional trend.

Statistics: On a weekly basis, the principal index was up a total of 7.75 points, or 0.5% to 1,706.28, against 1,698.53 on April 12.

Weekly turnover stood at 4.188 billion units worth RM8.265bil, versus 5.535 billion shares valued at RM9.124bil changed hands during the previous week.

Technical indicators: After retracing from the top to the 43% level, the oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index reversed trend to end at the 68% and 61% respectively yesterday.

In stark contrast, the 14-day relative strength index (RSI) had weakened slightly from a reading of 78 to settle at the 64 points level.

Meanwhile, the daily moving average convergence/divergence (MACD) had indicated a mild negative divergence pictogram despite retaining the buy signal.

Weekly indicators were little changed, with the weekly slow-stochastic momentum index and the weekly MACD maintaining the buy signal.

Outlook: Foreign funds continued to support the blue chips. On the contrary, the local institutional players were in liquidation mood and the retail investors largely staying on the sidelines, adopting a cautious stance.

This has been the trading pattern over the past several weeks and it is likely to prevail until the full results of the 13th general election are known on May 5 or the early morning the following day.

In spite of thin volumes, Bursa managed to chalk up gains for the fourth consecutive week and occasionally, scaling a new apex.

It was a commendable achievement.

With the FBM KLCI holding firm above all the moving average lines on our radar and the chart painting a bullish pictogram, it looks like the market still has the potential to move higher going forward.

Technically, the softening of the 14-day RSI and the mild negative divergence of the MACD suggest the local bourse is likely to consolidate this week, probably within a moderate range.

The immediate support is seen at the 1,696 points. A slip below the 21-day SMA of 1,683 points may drag the key index to the 1,645-1,655 points band.

To the upside, stiff resistance can be expected at every 20 points or 30 points interval above the 1,700 points psychological level.

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