THE FBM KLCI rebounded, as I had expected last week, and rose above the immediate resistance level at 1,790 points. A rebound in crude oil prices and firm ringgit helped the market to gain some confidence. There are also signs of foreign institutions picking up local shares as the weak ringgit made Malaysian stocks attractive. The KLCI increased 1.4% to 1,814.04 points, the highest level in three weeks. The index, however, is still below the crucial resistance level at 1,820 points, which is the long-term 200-day moving average. The index has been trying to break above this average since the beginning of this year but has failed.
Trading volume has declined but trading value has increased which indicates higher priced stocks, which are normally traded by institutions, were the main focus. Average daily trading volume was 2.2 billion shares in the past week compared with 2.7 billion shares two weeks ago. The average daily trading volume increased to RM2.1 billion as compared with RM2 billion in the previous week.
After weeks of selling, foreign institutions started to buy last week. Net buying by foreign institutions last week (Monday to Friday) was RM565.5 million, while net buying from local institutions was RM452.6 million. Local retail net selling was RM112.9 million.
Only three out of the 30 companies in the KLCI fell. The three decliners were Tenaga Nasional Bhd (-1.5% from last week), SapuraKencana Petroleum Bhd (-0.4%) and Malayan Banking Bhd (-0.1%). The top three gainers were Petronas Chemicals Group Bhd (+9.9%), IHH Healthcare Bhd (+7.5%) and IOI Properties Group Bhd (+5.8%).
Markets in Asia continued their bullish momentum last week. The Shanghai Stock Exchange Composite Index continued to climb to seven-year highs, rising 5.4% in a week to 3,691.95 points. Japan’s Nikkei 225 rose 1.4% to 19,713.45, the highest level in 15 years. Hong Kong’s Hang Seng Index increased 2.1% to 24,399.60 points. Singapore’s Straits Times Index rose 1.3% to 3,413.26 points.
Markets in the West were also bullish after the US Federal Reserve indicated last week that it may raise interest rates later rather than sooner. Last Monday, the US Dow Jones Industrial Average rose 0.8% in a week to 18,116.04 points. London’s FTSE100 index increased 3.3% in a week to 7,027.26 points, a record high. However, Germany’s DAX Index fell 2.2% in a week to 11,895.84 points after rising to a record high two weeks ago.
The US dollar weakened last week on the Fed’s statement. The US dollar index declined from 100.04 points to 97.30 points. The ringgit slightly strengthened from 3.69 last week to a US dollar to 3.65. Gold rebounded on a weak US dollar, increasing 3% in a week to US$1,188.80 an ounce. Crude oil (Brent Crude) rebounded and rose 3.7% in a week to US$55.92 per barrel. Crude palm oil futures on Bursa Malaysia increased marginally to RM2,156 per tonne.
Gold and crude oil prices continued to be pressured by a strong US dollar. Commodity Exchange gold declined 1.1% in a week to US$1,153.80 an ounce. Crude oil (Brent Crude) declined 7.8% to US$53.94 per barrel. Crude palm oil futures in Bursa Malaysia fell 4.4% in a week to RM2,140 per tonne on weak demand and falling crude oil and soy oil prices.
Technically, the KLCI trend is bullish and is supported by strong bullish market performances globally. The KLCI is above the short-term 30-day moving average and the Ichimoku Cloud indicator. However, the low crude oil price and weak ringgit weighed down the markets. The rebound in crude oil and stronger ringgit last week may be a catalyst for investors to start building their confidence in Bursa Malaysia, whose performance is lagging behind other markets. The lower prices may attract investors.
Momentum has started to build up. The RSI and Momentum Oscillator indicators are above the mid-levels and the MACD indicator is above its moving average. The KLCI is also above the middle band of the Bollinger Bands indicator. However, the index needs to break above the 200-day moving average resistance level for the market to build confidence.
The market is likely going to test the 1,820-point resistance level, and with the current market environment and technical indications, there is a high possibility for the index to break above the resistance level and climb higher. With that breakout, the index can even climb to historical highs. However, if the market environment changes negatively, the trend may not be able to stay bullish. Henceforth, I am expecting the KLCI to stay bullish if it can stay above the immediate support level of 1,774 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.
This article first appeared in The Edge Financial Daily, on March 25, 2015.