REVIEW: The positive momentum generated by the US and China approaching a trade deal could not be sustained without new developments.
Unfortunately for global markets, more details on how the two nations will come together to sign off on the first stage of a potential trade agreement were not forthcoming, leading to a spate of profit-taking.
Similarly on the domestic scene, it became evident that Bursa Malaysia had been buoyed in recent weeks by positive chatter over the possible end to the US-China trade war.
Setting off the week on a sour mood, US President Donald Trump had commented over the weekend that he was not yet committed to rolling back existing trade tariffs, which was in opposition to earlier bullish comments from a Chinese spokesperson.
A fresh round of violence by protestors in Hong Kong also lent to the uncertainty as the financial hub faced sustained disruption to business. Major banks in the city closed certain branches and encouraged employees to work from home.
The rally on the FBM KLCI was halted as investors waited for President Trump to divulge fresh details on the ongoing trade negotiations.
High on the agenda was anticipation over the president’s upcoming speech in New York, where among other things, he was expected to address the trade issue that had been the main catalyst in global markets.
Transfixed on news that might help to confirm the recent bullish speculation, the FBM KCI was virtually unchanged after the first two days trading, ending Tuesday at 1,609.73.
The speech would turn out to be a disappointment. Trump focused on his economic agenda but failed to reveal any specifics on the trade developments with China.
Confusion reigned as Asia opened for business the following day. Investors, cognisant that perhaps all the market noise was not leading to any tangible progress, pared down their stakes in a cautionary move.
The FBM KLCI pulled back sharply on Wednesday along with other Asian markets.
However, there was set to be a bigger shock for local investors as Petronas Chemicals reported a steep fall in its third-quarter earnings. Investors sold down on the stock, dragging on the index.
At market close, the FBM KLCI was down 12.51 points to 1,597.22, once more returning below the 1,600 mark.
The negative sentiment was sustained on Thursday as the silence over the trade war was filled with news that investment and production figures in China for October missed expectations.
The local index slipped a further 3.67 points to 1,593.55 as the negative momentum accelerated towards the lower support of 1,570.
The release of Malaysia’s third quarter GDP data on Friday came in line with Bloomberg estimates, which lent a mild but positive boost to the index.
Comments from the White House that the trade war was on track seemed to go unnoticed on the local market, which showed signs of fatigue over the sustained speculation. After a volatile session, the FBM KLCI rallied in the late afternoon session to end slightly higher at 1,594.75.
Statistics: The major index ended the week 14.98 points, or 0.9%, lower over the previous Friday, at 1,594.75.
Total turnover for the trading week stood at 11.9 billion shares amounting to RM8.56bil compared with 13.61 billion shares worth RM9.88bil over the previous four-day trading week.
Outlook: The FBM KLCI came in danger of relinquishing control to the bears following Wednesday’s steep decline. However, short of crossing below the 1,590 support level, a window of opportunity remains open for the share to bounce higher past the 1,600 mark and reclaim some lost ground.
Based on the daily price chart, the ascending trend line that began in October remains intact. The technical indicators are looking weak as the slow-stochastic plunged to oversold conditions on the back of the recent performance, and remains in a steeply falling position. It may soon attempt to neutralise as Friday’s performance showed the FBM KLCI firming up above the immediate support.
There is also a bearish turn in the daily moving average convergence/divergence line as it comes close to falling below the signal line. Nevertheless, it remains afloat in positive territory, indicating that the positive trend signal it gave in the closing days of October remains intact.
In the days ahead, the falling momentum could see the FBM KLCI struggling against the 1,590 support, a breach of which would see it erase the gains made in November and descend towards the lower support of 1,570.
Overhead, the 100-day simple moving average has descended to just below 1,615, the high point hit on Tuesday. A return above this moving average would see the continuation of the short term uptrend and a bullish indication that the share is targeting the 1,625-resistance level.