REVIEW: The FBM KLCI struggled to pick up any speed above the 1,600 line. Going by the net negative performance on Bursa Malaysia this week, investors are intent to keep to safety levels on the FBM KLCI so long as there is no confidence in an economic recovery given rising global cases of Covid-19 and worsening tensions between the US and China.
While US corporate earnings - many of which are beating expectations given the low forecasts set by analysts - are streaming in, global investors are more focused on further stimulus or policy that will lift the investment landscape.
The US coronavirus relief bill, which stalled following an impasse in between policymakers, set the downward mood on Bursa Malaysia, which by Wednesday had come within reach of breaking below the consolidation channel at 1,560.
However, the support remained intact. As US policymakers forge on towards a deal, successful negotiations should lead to a swing higher in economic sentiment.
There continues to be net foreign selling on the Malaysian market, which indicates investors’ continued weak risk appetite in light of the poor economic outlook.
That is not to say that there has not been a rush of trading on Bursa Malaysia. On the contrary, daily exchange volumes continued to scale to new heights on unprecedented domestic participation in small caps.
While the FBM KLCI continues to dawdle in range-bound movement, domestic retail buyers are flooding into stocks benefiting from the crisis.
Glove manufacturers remained on an uptrend while another latex-related stock, condom maker Karex, nearly doubled its valuations over the week in anticipation of product diversification.
Positions continued to grow in stocks that are seen to benefit from the discovery of a vaccine with pharmaceutical counters tacking on impressive gains.
Meanwhile, the surge in gold prices to a new record ramped up the valuations of jewellers Tomei and Poh Kong while local technology counters tracked Wall Street’s Nasdaq higher.
After closing at a week’s low of 1,568 on Wednesday, news over a US$1bil deal struck between Johnson & Johnson and the US government once again brought vaccine hopes to light, and with it light at the end of the pandemic tunnel, setting the stage for the FBM KLCI to swing higher.
The FBM KLCI rose 20.44 points to end Thursday at 1,588.57. On Friday, US President Donald Trump’s ban on popular Chinese apps raised tensions with Beijing, leading to a retreat in markets ahead of the weekend. The FBM KLCI closed 10.43 points lower at 1,578.14.
Statistics: The major index ended the week 25.61 points or 1.6% lower over the previous Thursday at 1,578.14. Total turnover for the trading week stood at 72.05 billion shares amounting to RM44.56bil compared with 45.92 billion shares worth RM26.59bil in the previous four-day trading week.
Outlook: While the market came at risk of breaking below the support during the week with a brief breach of the 1,560 line in Tuesday trading, a subsequent bounce higher prevented a breakdown. The FBM KLCI remains in consolidation mode, travelling between the 1,560 and 1,620 levels.
However, there remain bullish signs on the daily price chart. The rising 50-day SMA is offering support near the 1,560 level and is expected to offer growing support over the coming days.
The technical indicators are looking neutral with the momentum bouncing higher. For the coming sessions, the index is expected to grow higher towards the resistance.
Short of positive catalysts, the FBM KLCI is expected to stall again at the hurdle.
The resistance levels remain unchanged at 1,620 and 1,650 while support lies at 1,560 and 1,510.
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