REVIEW: The FBM KLCI was held in consolidation mode following last Friday’s regional rout. While there was an Asian rebound, weak Chinese economic data for the last month kept a cap on gains.
On the home front, as the index ended the previous Friday on the 1,680 support line, there was hope yet that the market would retrace towards the 1,700-point mark.
Unfortunately for Bursa Malaysia, however, the worst was not yet over as a second sharp decline on Monday dashed hopes of a recovery and put the index firmly in the grip of a consolidation channel.
On this day, the fall was led by export-oriented glove makers under pressure from a weakening US dollar.
Talk of stimulus measures in China on Sunday did little to prep the local market for a positive start, even though it helped China and other regional markets retrace some of the previous week’s losses.
A mild rebound was seen on the local market over Tuesday and Wednesday, although it was underwhelming and kept the index within its trading range.
The FBM KLCI closed Wednesday at the week’s highest level of 1,678.24 points.
That same day, UOB Asset Management Malaysia CEO Lim Suet Ling said she expected Malaysia’s stock markets to remain in consolidation mode until June, stating that the index was set to stay between 1,650 and 1,700 points over the first half of the year, with a year-end target of 1,750.
On Thursday, the FBM KLCI maintained its sideways trading action, slipping a slight 3.72 points to 1,674.52.
Over the week, mixed economic data coming out of China - showing slowing growth in industrial production but better-than-expected retails sales and fixed asset investment - kept investors indecisive, further facilitating the sideways direction of stocks.
Bursa Malaysia achieved a trading volume of 4.77 billion shares on Thursday, its highest daily volume since May 14, 2018 while daily trading value rose to RM3.67bil on Friday, its highest since Nov 30, 2018.
Trading activity had noticeably spiked on Bursa Malaysia over the latter half of the week as investors actively traded in small-cap oil and gas (O&G) counters, buoyed by the commodity’s positive outlook.
O&G counter Perdana Petroleum hit a historically high volume of 339.98 million shares on Wednesday with interest remaining elevated on Thursday.
Yesterday, China’s two-week National People’s Congress wrapped up with Premier Li Keqiang emphasising that the government could use reserve requirements and interest rates to support economic growth. This comes amid measures to cut value-added tax and social security fees.
News on positive talks between the US and China also helped to lift the general sentiment, although the trade noise did little to change the investment outlook. Sentiment has been sour, given that hopes of an end-March resolution have been cast aside.
On that note, the FBM KLCI rose 6.02 points, returning the index to the 1,680 mark and little changed on the week.
Meanwhile, Brexit fears have been growing over in Europe. With the March 29 deadline for the UK’s exit from the EU looming, several crucial votes took place in UK’s Parliament. However, lawmakers appeared as divided as ever, first rejecting Prime Minister Theresa May’s exit plan before voting a second time against a no-deal Brexit.
By Friday morning, Parliament had voted to delay Brexit, giving time for May to press for reconciliation on her exit deal.
Statistics: The major index ended the week 0.64 points higher, virtually unchanged over the previous week, at 1,680.54. Total turnover for the trading week stood at 19 billion shares amounting to RM13.22bil compared with 13.74 billion shares worth RM11.26bil over the previous week.
Outlook: The FBM KLCI showed little decisive movement over the week, which indicates that investors are still awaiting fresh leads. Trapped within a sideways trading channel, any hope of a breakout would require concrete improvements in the external environment. At the 1,680 level, the index erased gains seen during the mid-February rally and returned to January trading levels.
However, the technical outlook does suggest there is room for some slight improvement in the days ahead.
The technical indicators have turned more bullish over the course of recent days and the index ended the week on a positive performance, which does suggest that there could be a budding trend towards the 1,700 mark over the course of the coming week.
A convergence of the 50- and 100-day simple moving averages at the 1,690 mark suggests resistance at that point, with a crossing indicating a return to positive sentiment.
The slow-stochastic and 14-day relative strength index have spiked up from oversold conditions, indicating a return to positive momentum.
The index bounced off a low of 1,664 this week, which represents the immediate support level before descending towards 1,652.
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