The FBM KLCI finally broke above the immediate resistance level of a sideways trend at 1,675 points and closed at its highest in three-and-a-half months. Bargain hunting continued in the first month of the second half of the year, especially from foreign institutions who have been net sellers in the second quarter. The FBM KLCI increased 1.2% in a week to 1,684.15 points.
Trading volume was higher last week as market confidence strengthened. The average daily trading volume last week was 2.2 billion shares compared with two billion shares two weeks ago. However, the average daily trading value remained firm at RM1.9 billion. This indicates that more lower-capped stocks, which are favoured by the local retail market, were being traded.
A stronger ringgit continued to lure foreign institutions. Net buying from foreign institutions in Bursa Malaysia was RM302 million, while net selling from local institutions and retailers were RM263 million and RM39 million respectively. The ringgit was stronger against the US dollar from RM4.03 per dollar to RM4.01.
For the FBM KLCI, only four out of 30 counters declined. The top gainers for the week were UMW Holdings Bhd (+11.9% in a week to RM6.48), Hong Leong Financial Group Bhd (+6.3% to RM16.16) and SapuraKencana Petroleum Bhd (+5.6% to RM1.50). The top decliners were IOI Properties Group Bhd (-2% to RM2.42), IOI Corp Bhd (-1.4% to RM4.39) and PPB Group Bhd (-1% to RM16.02).
Asian markets rebounded and closed mostly higher. China’s Shanghai Stock Exchange Composite Index increased 2.5% in a week to 3,051.02 points last Friday. Japan’s Nikkei 225 index jumped 4.1% in a week to its two-month high of 16,919.92 points. Hong Kong’s Hang Seng Index rose 2.8% in a week to 22,766.91 points, the highest in nine months. Singapore’s Straits Times Index increased 1.4% to 2,867.4 points.
The US and European markets were generally bullish. The US Dow Jones Industrial Average increased 0.2% in a week to 18,576.47 points last Friday and was at a historical high last Thursday. London’s FTSE 100 rose 1.8% in a week to 6,916.02 points, the highest in 14 months. Germany’s DAX Index rose 3.3% to 10,713.43 points after climbing to its highest level to date last Thursday.
The US dollar slightly weakened against major currencies. The US Dollar Index futures declined from 96.1 points the week before to 95.7 points last Friday. Commodity Exchange Gold was firm at US$1,333.20 (RM5,306.14) an ounce. Crude oil (Brent) increased 6.1% in a week to US$46.97 per barrel. Crude palm oil in Bursa jumped 4.9% in a week to RM2,523 per tonne on stronger palm oil shipping for the month of July.
The 1,675-point resistance level of the FBM KLCI is finally broken. This level was tested in mid-July. The index is above the short-term 30-day moving average but below the long-term 200-day moving average and hence, the breakout indicates that the FBM KLCI is set to trend higher. Furthermore, the FBM KLCI climbed above the Ichimoku Cloud.
The bullish market sentiment strengthened last week. Momentum indicators such as the Relative Strength Index and oscillator are above their middle levels and increasing. The moving average convergence divergence indicator rose above its moving average and the Bollinger Bands are expanding as the FBM KLCI has been testing the top band of the Bollinger Bands in the last two trading days.
The long-term, stronger resistance level is at 1,730 points. There is a possibility for the FBM KLCI to test this level, but there is another technical resistance at 1,700 points. We expect the index to test 1,700 points as long as it can stay above the broken resistance level (now turned support) of 1,675 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.