REVIEW: It was a sombre reminder despite the optimism in global equity markets over recent weeks that we are not out of the woods yet.
If anything, investors’ flight to safety at the start of the week - an extension of the sell-off in the previous session – reminded us that there is little certainty over the outcome of Covid-19 situation.
As new infections emerged in China, investors pulled out of equities at an accelerated pace.
On the domestic market, the FBM KLCI dove over 45 points points on Monday as investors made a hurried retreat to the technically supportive level of 1,500 points.
There was also some upbeat sentiment on the US economy as May retail sales figures showed breaking records, suggesting a revival in consumer spending.
With support levels reinforced by the data and stimulus measures, the US market bounced higher from earlier losses.
Similarly, Malaysian investors felt the selldown on Monday was sufficiently steep for the time-being. Finding comfort closer to 1,500, the FBM KLCI jumped 18.88 points to 1,517.71 on Tuesday.
It was telling of the market situation that local glove makers would fail to reclaim their previous levels of trading. Reflecting an overbought market and even more overheated sector, the fresh fears of a protracted pandemic failed to significantly rally the sector.
As the midweek arrived, there were some reassurances that a potential “second wave” of infections in China was being nipped in the bud as the authorities imposed restricted movement in the capital.
The threat remained all too present however and investors were jittery over the course of Thursday trading. However the local index managed to pull itself out of the red after the lunch break and ended 8.61 points higher at 1,526.32.
The late recovery was in part owing to reports that Genting Malaysia would be reopening its facilities on Friday to members. On that news, both the casino operator and its parent, Genting, added points to the FBM KLCI.On Thursday, the coronavirus jitters continued as the FBM KLCI retreated 21.41 points to 1,504.91.
While the selling added downward pressure the price chart, the market managed to hold its ground on Friday, despite opening below the 1,500-point level. The FBM KLCI ended yesterday 2.35 points higher at 1507.26.
Statistics: The major index ended the week 38.76 points, or 2.5% lower over the previous Friday at 1,507.26. Total turnover for the week stood at 36.02 billion shares amounting to RM22.07bil compared with 33.89 billion shares worth RM21.6bil in the previous trading week.
Outlook: The FBM KLCI came close to falling below the crucial support of 1,500 but managed to clamber up to safety and into positive territory before the end of trading.
This suggests that while the outlook has weakened over the course of the week, the market is not yet ready to return to a downtrend, pending further developments on the coronavirus situation.
The bounce yesterday could a signal that the market is entering a sideways movement near the 1,500-point level. In the event of a negative breach of the support, the index will be seen returning to a correction phase.
Concomitantly, signs of consolidation have appeared on the technical indicators with both the slow-stochastic and relative strength index flattening out above the oversold line. The MACD remains positive although it is falling faster below the signal line owing to the recent weakness.
The support levels for the stock are 1,500 and 1,460 while resistance levels are pegged to 1,550 and 1,600.
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