This article first appeared in The Edge Financial Daily, on March 16, 2016.

The market was a little bit cautious in the early part of last week, but rebounded to close higher than in the previous week. Factors supporting the increase are the stronger ringgit, rising crude palm oil and crude oil prices. On a macro scale, the European Central Bank’s decision to lower interest rates helped boost equity markets. The FBM KLCI rose 0.2% to 1,696.54 points last Friday

The ringgit was firm against the US dollar from last week and is currently at 4.08 to the US dollar. The resilient ringgit is a boost for foreign investors as they continue to accumulate shares on Bursa Malaysia. Net buying from foreign institutions last week (Monday to Friday) was RM1,036 million and net selling from local institutions and retail was RM1,016 million and RM20 million respectively.

The volume was higher last week compared with that in the previous week. The average daily trading volume in the past one week was two billion shares compared with 1.8 billion shares two weeks ago. The average trading value, however, declined from RM2.2 billion to RM2.1 billion, a sign of more lower-cap stocks being traded.

For the FBM KLCI, gainers outpaced decliners four to three. The top gainers for the week were Genting Bhd (+6.0% in a week), IOI Corp Bhd (+4.2%) and Astro Malaysia Holdings Bhd (+3.9%). The top decliners were Petronas Chemicals Group Bhd (-3.3%), Digi.Com Bhd (-2.0%) and Genting Malaysia Bhd (-1.6%).

Asian markets ended up firm and mixed after a rebound in the last trading days of the week erased earlier losses. China’s Shanghai Stock Exchange Composite index fell 2.2% in a week to 2,809.17 points last Friday. Japan’s Nikkei 225 index declined 0.4% to 16,938.87 points. Hong Kong’s Hang Seng Index increased only 0.1% in a week to 20,199.60 points, and Singapore’s Straits Times fell 0.3% to 2,828.86 points. 

The US market was slightly bullish, but European markets were mixed. The Dow Jones Industrial Average increased 1.2% in a week to 17,213.31 points. Germany’s DAX Index increased marginally higher from last week to 9,498.15 points, and London’s FTSE 100 declined 1% to 6,139.79 points.

The US dollar weakened against major currencies last week. The US dollar index futures fell from 97.3 points a week ago to 96.2 points. Commodity exchange gold pulled back for a correction and declined 0.7% in a week to US$1,251.10 (RM5,167.04) an ounce. US crude oil (WTI) jumped 5.9% in a week to US$38.49 a barrel, the highest in three months. Crude palm oil on Bursa Malaysia also rallied and increased 4.1% in a week to RM2,607 per tonne last Friday on lower production expectations in the next few months.

The FBM KLCI managed to stay above the long-term 200-day moving average after climbing above it two weeks ago, and is also well above the Ichimoku Cloud indicator. The index is able to rebound above the support levels after a pullback earlier last week, and this shows that the market is still being supported despite some uncertainty and volatility.

Momentum indicators continued to show a resilient trend. The RSI indicator continued to increase above its mid-level and the MACD indicator climbed above its moving average. The index is also trading at the upper range of the Bollinger Bands indicator. 

The index tested and broke above the resistance level at 1,700 points, but failed to stay above this level. Expect the index to break above this level given the current bullish support and momentum. If this happens, the index is set to trend higher towards the next resistance level at 1,740 points in the short term, as long as the index stays above the uptrend support level (line S1) and the short- term 30-day moving average at 1,670 points.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia. He can be contacted at [email protected]. The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.