Rally, heavy trading continue

  • Stocks Analysis
  • Saturday, 30 May 2020


REVIEW: The easing lockdowns in many countries and hopes for a vaccine discovery remain the focal point of investor-buying, which has been driving up market valuations in what appears to be a strong, sustained recovery.

Nevermind the ongoing anxieties over the economic impact of the Covid-19 coronavirus or worsening geopolitical tensions, the world’s-benchmark US market seems invested in the idea that other headwinds are but distractions in the face of the coronavirus threat.

Going by conventional wisdom, Covid-19 serves as the immediate risk to returns, and the sooner the crisis is resolved the more quickly the global ecnomy can get back on its feet.

The equities performance over the past week has showed that Wall Street is the biggest proponent of the “vaccine first” mentality as the major indices surged past critical points in their recovery.

The Dow Jones Industrial Average stayed on course and pushed past the 25,000-point mark in Wednesday trading, urging a buy-in for other world markets.

Bursa Malaysia, which had just three trading days this week due to the Aidilfitri holidays, has been one market seen benefiting from the uptick in optimism.

As risk appetite returns, so too does the flow of money into developing markets and currencies.

The local bourse reopened for trading on Wednesday, coinciding with fresh political unrest in Hong Kong as civil rights demonstrators responded to Beijing’s proposal of a new national security law, seen as an effort to clamp down on dissent in the city.

The Malaysian benchmark index shrugged off this news as it played catch-up with the improved global sentiment, rising 14.97 points to 1,451.73. The gravity-defying rally in glove manufacturer counters was triggered once again with Top Glove rising to RM13.32 at one point and Hartalega reaching as high as RM11.40.

At ther 1,450 mark, the market seemed to turn more cautious especially given a US warning that Hong Kong might lost its special status, which recognises the city as distinct from China.

The move, which would jeapordise Hong Kong’s standing as a global financial hub and subject it to the same sanctions levied against China, put a lid on sentiment in Thursday trading.

Nevertheless, the FBM KCLI rallied 5.77 points to 1,457.5 by market close.

While Friday started with profit-taking, the index advanced over the course of the day and crossed into positive territory in the later session.

By market close, the index had put on an impressive 15.75 points to 1,473.25 while the bourse hit a record daily trading value of RM9.31bil.

Statistics: The major index ended the week 36.49 points, or 2.5%, higher over the previous Friday at 1,473.25. Total turnover for the holiday-shortened week stood at 23.18 billion shares amounting to RM19.53bil compared with 41.3 billion shares worth RM21.54bil in the previous week.

Outlook: The rally on Bursa Malaysia continued over the week to take the FBM KLCI to its highest in in nearly three months. At 1,470, the index has hit the 38.2% Fibonacci retracement level, a convincing breach of which would bode well for the extension of the recovery.

Given the sustained heavy trading activity on the market, it would appear that fatigue is yet to set in as investors continue to shore up prices.

There are signs that the rally may be overdone at this stage. The technical indicators have bounced back into overbought territory after a brief descent before the Aidilfitri holidays that suggested the start of a consolidation phase..

However, short of a convincing dip in momentum, the upward push remains intact.

Going by the bullish trend, the FBM KLCI could be aiming for the 1,500-point mark.

Above that the 200-day SMA serves as the next obstacle at 1,520. Support levels are found at 1,450 and 1,430.

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