THE market continued to increase in the past one week after a rebound two weeks ago despite weak performances in markets in the region. The market was led by plantation stocks as crude palm oil prices rebounded strongly. Yesterday, palm oil prices was boosted as Plantation Industries and Commodities Minister Datuk Amar Douglas Uggah Embas said in an industry seminar in Kuala Lumpur that Malaysia will implement the biodiesel B7 programme in stages next month. The benchmark FBM KLCI rose 1.6% in a week to 1,825.68 points yesterday.

However, trading volume was lower as compared with the previous week. Average daily trading volume in the past one week was only 1.9 billion shares as compared with 2.3 billion shares in the previous week. Average daily trading value was at RM1.9 billion, lower than the RM2.4 billion two weeks ago. Total market valuation increased RM36 billion from last week to RM1,741 billion. The buying came from local institutions.

Net buying from local institutions the whole of last week was RM631.4 million. Foreign institutions net selling was RM470.7 while retail net selling was RM160.7 million. In the FBM KLCI, only three out of 30 counters declined from last week. Gainers were led by Felda Global Ventures Holdings Bhd (+13.7%), Kuala Lumpur Kepong Bhd (+11.2%) and IOI Properties Group Bhd (+5.2%) while decliners in the index were led by SapuraKencana Petroleum Bhd (-5.0%), CIMB Group Holdings Bhd (-3.3%) and AMMB Holdings Bhd (-0.1%).

Asian markets were generally bullish on continuous bargain hunting in the past one week after a rebound two weeks ago. Singapore’s Straits Times Index increased only 0.3% in a week to 3,211.65 points. Hong Kong’s Hang Seng Index rose 1.9% in a week to 23,520.36. China’s Shanghai Stock Exchange Composite rose sharply yesterday, rising 2.1% to 2,337.87 and is marginally higher from last week. Japan’s Nikkei 225 rose 3.5% in a week to 15,329.91 points.

Markets in the United States and Europe were also bullish. On Monday, the US Dow Jones Industrial Average increased 2.5% in a week to 16,817.94 points. London’s FTSE100 Index rose 1.5% in a week to 6,363.46 points and Germany’s DAX increased 1.3% to 8,902.61. The US dollar index rose from 85.04 points a week ago to 85.56 points.

Stronger US dollar and bullish equity markets put pressure on gold prices. Commodity Exchange gold declined 1.7% in a week to US$1,225.30 (RM4,014) an ounce. Crude oil remained bearish and continues to trade near two-year lows. New York Mercantile Exchange WTI crude oil fell 1.7% in a week to US$80.67 per barrel. Crude palm oil futures in Bursa Malaysia rebounded and increased 3.5% in a week to RM2,212 per tonne. The ringgit was slightly weaker against the US dollar at RM3.27 per dollar as compared with RM3.26 a week ago.

I mentioned that the rebound may be weak if the index was unable to stay above 1,800 points. The index managed to stay above this level and even broke above the immediate resistance level at 1,820 points. The FBM KLCI is now at the short-term 30-day moving average (MA). Despite the increase, the trend remained bearish as the short- to long-term 30-to 200-day MAs continued to decline and the index below these averages. This indicates that the index is still in a technical rebound of a bearish trend.

However, momentum indicators like the RSI and Momentum Oscillator have climbed above their mid-levels and this indicates that the sentiment has turned somewhat bullish in the short term. Furthermore, the MACD indicator has crossed above its nine-day moving average and the index rose above the mid-level of the Bollinger Bands.

The bullish momentum in the past two weeks may continue this week but there may be resistance at 1,840 points as this is the level where the index may be overbought in the short term. Bullish regional markets may remain bullish in the short term after strong rebounds in the past one week and this may boost market confidence. However, the market is still in a downtrend and the current short-term rally may remain bullish as long as the index stays above 1,800 points. Sector to watch this week is plantation.

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 October 29, 2014.