REVIEW: Soon after opening the week a shade above the flat line, Bursa Malaysia’s key barometer, the Kuala Lumpur Composite Index (FBM KLCI) slipped into the negative territory due to bad news flow.
The local bourse had started up 0.28 of a point to 1,657.89.
Sentiment was decisively frail, with blue chips leading the decliners board, tracking heavy losses in overnight Wall Street and Crude oil prices.
Adding to the downbeat mood, regional markets slumped, led by the Shanghai Composite Index while Japan was shut for a public holiday.
A revision of the Malaysia’s credit-rating outlook from positive to stable by Moody’s Investors Services further weighed on the broader market.
In the absence of support from investors, the key index eased steadily throughout to finish at the day’s low of 1,637.59, losing a substantial 20.02 points on Monday.
Technically, the local market has carved out a bearish signal, setting the stage for more downward pressure the next day.
Fortunately, a late turnaround in overnight Wall Street on relief rebound, provided an excuse for the local boys to look for bargain hunting activity.
Though there was a fresh bout of buying in the market, the overall sentiment was cautious and concentrated, with regional bourses trading mostly lower and not supportive of our market.
Meanwhile, a plunging crude oil prices kept a lid on the market.
Nevertheless, gains in select blue chips helped push the key index marginally steadier but second and lower liners were lower on extended correction and it was clearly reflected on the scoreboard.
In spite of the FBM KLCI chalking up 3.78 points to 1,641.37, losers outpaced advaners by 470 to 384 on Tuesday.
Equities in the Asia-Pacific region turned higher on Wednesday after the Dow sustained rebounds for the second straight day, as investors bought back the recent beaten down stocks on short-covering.
Elsewhere, crude oil prices rose in Asian electronic trading after data showed US stockpiles unexpectedly fall the previous week.
On the back of the better global sentiment, Bursa added 1.17 points to 1,642.54, but in volatile session in mid-week.
Then after a two-day respite, Wall Street took an ugly turn and sank amid fresh selling, as investors fretted about the health of the world economy, low energy prices and the upcoming US corporate earnings season.
The bombing in central Jakarta further depressed sentiment.
As expected, stocks in Asia tumbled and in line with global weakness, Bursa shed 9.10 points to 1,633.44 on Thursday.
And yesterday, the local investors reversed earlier gains to settle 4.89 points lower to 1,628.55, tracking frail regional trend.
Statistics: On a Friday-to-Friday basis, the major index lost 29.06 points, or 1.8% to 1,628.55 yesterday, versus 1,657.61 on Jan 8. Weekly turnover amounted to 9.516 billion shares valued at RM9.801bil, compared with 11.303 billion units worth RM10.186bil done a week ago.
Outlook: Bursa extended the correction mode amid persistent profit-taking selling, with the FBM KLCI declining for the second straight week, as investors continued to fret about the impact of a slowdown in the world’s second biggest economy, the meltdown in crude oil prices and the second round of devaluation of the Chinese Yuan, exacerbated by weakness in the local currency and Moody’s revision of the Malaysia’s credit-rating outlook.
However, despite the key index suffering losses week-on-week basis, the underlying tone of the market was very much unchanged and unlike certain exchanges, there was no evidence of unusual selling on the domestic front.
Going forward, we expect the present cautious sentiment to prevail in the absence of clarity, with China equities continuing to experience great volatility and crude oil prices remaining fragile and uncertainty clouding US stocks although they had stage a significant rebound the previous day.
Based on the daily chart, the FBM KLCI is flirting in dangerous waters, holding marginally above the recent lows of 1,622.84 set in mid-December last year.
If this support is taken out and the key index slips further below the 1,620 points, investors can expect selling to intensify and dent the market.
And should that happens, the 1,600-point psychological level and the lower 1,568-point floor will be in great danger.
But we reckon that Bursa will probably be range-bound and calm, awaiting the global sentiment to turn better.
Technically, the ticking up sign on the daily slow-stochastic momentum index and the 14-day relative strength index offer a ray of hope the local bourse may rebound this week, but the upside will probably be capped, either at the 200-day SMA of 1,705 points, 1,706.25 points or the 1,727-1,730-point band.
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