Testing support at 1,530 points


  • Stocks Analysis
  • Saturday, 22 Feb 2020

REVIEW: Bursa Malaysia endured a losing streak amid downgrades on economic growth in the region as analysts and central banks weighed the impact of the Covid-19 outbreak over the coming quarters.

Across the causeway, Singapore downgraded its gross domestic product forecast to 0.5% for 2020, the mid-point of a new estimate range of between -0.5% and 1.5%.

On the FBM KLCI, a consolidation channel was seen building on the daily price chart as investors held their breath for signals that the coronavirus pandemic had peaked.

At Monday’s open, the FBM KCI dropped 7.34 points to 1,537.12 in a return to safety following the late-hour jump at the close of the previous session’s trading.

The retreat signalled a gradual descent towards the immediate support of 1,530.

While the US markets slumbered on Monday for the President’s Day holiday, Apple Inc issued a warning to investors that it would not meet its revenue guidance for its fiscal second quarter of 2020 due to the disruptions to supply and demand from the coronavirus in China.

Tech and semiconductor shares on Bursa Malaysia retreated as it opened for business on Tuesday, with MPI dropping 46 sen to RM10.88 and Pentamaster declining 15 sen to RM4.97.

However, owing to the tech sector’s lack of representation on the FBM KLCI, the index managed to end the session on a flat note. Having fallen to a low of 1,533 early in the day, the FBM KLCI retraced losses to close just 0.04 points lower at 1,537.09.

By this time, the coronavirus had claimed over 2,000 lives and infected more than 75,000 people. However, the number of new cases were seen declining, which raised hope that the outbreak was slowing.

In turn, this triggered a bout of profit-taking in Malaysian glove makers. Analysts predicted that the end of the outbreak could leave customers with a glut of supply, sending the share prices of manufacturers lower.

Top Glove and Hartalega were among the top declining stocks on the market on Wednesday, dragging on the FBM KLCI, while Kossan and Supermax were also similarly retracing recent gains.

The FBM KLCI ended 2.92 points lower at 1,534.16.

On Thursday, markets received a boost when it was revealed that the People’s Bank of China had lowered its benchmark lending rate by 0.1 percentage point to 4.05%. The index rose about six points before desending to end just 0.82 points higher at 1,534.98.

By yesterday, renewed coronavirus fears as the number of new cases increased outside of China exacerbated fears it would impact corporate earnings. The FBM KLCI ended 3.78 points lower at 1,531.20

Statistics: The major index ended the week 13.26 points or 0.9% lower over the previous Friday, at 1,531.20. Total turnover for the trading week stood at 13.93 billion shares amounting to RM10.32bil compared with 13.41 billion shares worth RM11.52bil over the previous trading week.

Outlook: The FBM KLCI tested the 1,530 support several times over the week, indicating that the selling pressure was building on the market.

Given the downward pressure from the short-term 14- and 21-day simple moving averages (SMAs) on the share, it seems increasingly likely that this support could be breached, and the index head towards a lower support of 1,500.

The slow-stochastic is seen rising slightly from oversold conditions but short of crossing into neutral territory, it remains bearish.

There is resistance at the 1,550 and 1,570 levels, the latter of which is reinforced by downward pressure from the 50- and 100-day SMAs.

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