REVIEW: Against the bearish US backdrop, Bursa Malaysia started out the week on a soft platform, with the FBM Kuala Lumpur Composite Index (FBM KLCI) gapping down a significant 16.37 points to 1,790.59. The numbers were only available at 9.22am due to a technical glitch earlier.
As usual, blue chips led declines and very quickly, the key index dropped to a low of 1,778.99, losing 27.97 points, exacerbated by a frail regional performance.
Elsewhere, most second and lower liners swooned on lack of support, but just when the FBM KLCI was in great danger of breaking down, some big boys emerged unexpectedly from the sidelines to nibble, helping shares to bounce off the day’s ebb.
However, the market still suffered big losses, ending down 15.22 points to 1,791.74 on Monday.
Overnight Dow recouped half of the previous session’s declines the next day on merger & acquisition deals while the European Central Bank embarked on its long-awaited quantitative easing proramme.
In an unprecedented move, stocks in the Asia-Pacific region were mostly lower amid worries about the US dollar spike and a slowdown in China after data indicated further weakness in its consumer spending.
Tracking the sluggish regional trend, Bursa flirted between an intra-day high and low of 1,799.05 and 1,789.73 respectively throughout before ending down 2.01 points to 1,789.73 on Tuesday.
Ater a short respite, overnight Wall Street resumed the downward spiral, plunging 332.78 points to 17,662.94, as investors continued to fret about sooner-than-expected interest rates increase in mid-year while a US-dollar rally dragged crude oil prices sharply lower.
Meanwhile, regional equities drifted deeper into the red on follow-through selling and in the absence of compelling leads on the horizon to boost buying, the local bourse took another beating, losing an extra 11.57 points to 1,778.16 in mid-week.
The growing prospects of higher interest rates kept Wall Street in check, but Asian stocks firmed on hopes that China would step up monetary easing to aid its slowing economy, underpinned by a surprising rate cut in South Korea.
Riding on the regional peers’ strength, the FBM KLCI bounced back to life, gaining 8.71 points to 1,786.87 in active volumes on Thursday.
And yesterday, the local bourse see-sawed in listless trade for most of the day before a bout of late selling dragged it down 5.12 points to 1,781.75, ignoring a steadier overseas trend.
Statistics: On a Friday-to-Friday basis, the principal index lost 25.21 points, or 1.4% to 1,781.75 yesterday, versus 1,806.96 on March 6.
Total turnover for the week amounted to 13.092 billion units valued at RM10.438bil, compared with 11.344 billion shares worth RM11.004bil changed hands previously.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index appeared ticking up after triggering a short-term buy near the oversold area yesterday.
The past week saw the 14-day relative strength index dipping to a low of 23 on Wednesday before curving up to settle at the 38-point level yesterday.
In stark contrast, the daily moving average convergence/divergence (MACD) histogram continued to expand negatively against the daily signal line to stay bearish. It had flashed a sell on March 2.
Weekly indicators still were tricky, with the slow-stochastic momentum index falling but the MACD retaining the buy signal.
Outlook: Bursa’s bellwether indicator, FBM KLCi violated the 100-day (SMA) and the lower 50-day SMA to touch a seven-week low of 1,774.97 during the week before investors emerged from the sidelines to seek bargain buys, helping to arrest the slide.
Very clearly, the local bourse is lagging the regional peers, largely due to weakness in crude oil prices and the ringgit.
With the black commodity and the local currrency remaining fragile, we reckon the upside potential of the domestic market would be capped in the short term.
Based on the daily chart, the 14-day SMA and 21-day SMA are now on the slide and with the two lines pressuring the key index, there is a possibility Bursa will stay in consolidation mode this week.
Technically, indicators are mixed, implying the local bourse may trade range-bound until a clearer picture emerges.
Resistance can be expected at the 1,805-1,806-point band, followed by the 200-day SMA of 1,826 points.
A decisive penetration of the upper 1,831.41 points stiff barrier would see the market turning decisively bullish, enroute to challenge the historical peak of 1,896.23 in the medium term.
A slip below the 1,770 points will signal an extended correction process and in this case, the lower floors of 1,750 points, 1,706.18 points and the 1,671.82 points will be vulnerable.