FBM KLCI — Rally may continue

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THE market continued to increase in the past one week after the FBM KLCI rebounded after the Chinese New Year holidays. Market sentiment was boosted by a rebound in crude and palm oil prices. Bullish performances in the global markets also help build market confidence. However, the market remained cautious as the index is currently testing the long-term 200-day moving average resistance level. The KLCI closed marginally higher from last week, rising only 0.2% in a week to 1,821.25 points.

Market volume was slightly higher in the past one week compared with the week before the holidays. Average daily trading volume was 2.1 billion shares. Foreign institutions began to accumulate albeit mildly last week as the ringgit gained some strength. Net buying from foreign institutions last week (Monday to Friday) was worth RM175 million while net selling from local institutions and local retail was RM86.4 million and RM88.6 million respectively.

For the KLCI, gainers edged decliners 17 to 11. Top three gainers in the index were Hong Leong Financial Group Bhd (4.6% from last week), Petronas Dagangan Bhd (4.2%) and Malayan Banking Bhd (3.3%). Top three decliners in the index were Felda Global Ventures Holdings  Bhd (23.1%), Sapurakencana Petroleum Bhd (11.6%) and YTL Corporation Bhd (6.3%).

Markets were generally bullish in the past one week. The Shanghai Stock Exchange Composite Index rose 1.1% to 3,264.78 points. Hong Kong’s Hang Seng Index closed marginally lower at 24,702.78 points after pulling back from the highest level in five months at 25,101.96 on Feb 27. Japan’s Nikkei 225 rose 1.1% to 18,815.16 points, the highest level in nearly 15 years. However, Singapore’s Straits Times was uncertain and closed 0.5% lower at 3,422.11 points.

The US and European markets continued to climb to record highs last week. On Monday, the US Dow Jones Industrial Average increased 0.9% in a week to its record high at 18,288.63 points. London’s FTSE100 index increased 0.5% to 6,937.52 points after slightly pulling back from its record high on Feb 24. Germany’s DAX Index increased 2.5% to 11,410.36 points, a record high. The US dollar index rose from 94.66 points a week ago to 95.34 points. The ringgit was firm against the US dollar at 3.62 to the dollar.

Bearish trend in gold has eased and the price has started to find some support. Comex gold increased 0.4% in a week to US$1,205.90 (RM4,365.36) an ounce. Crude oil remained firm and the Brent crude rose 1.1% to US$59.54 per barrel. Crude palm oil futures on Bursa Malaysia were bullish on soyoil prices rebound, increasing 5.3% in a week to RM2,378 per tonne.

Technically, the KLCI continues to stay bullish and the momentum is starting to strengthen after the holidays. The KLCI remained above the short-term 30-day moving average and the Ichimoku Cloud indicator. The index is also approaching the 1,830-point resistance level, which is also the long-term 200-day moving average. 

The momentum of the bullish trend is starting to gain strength as momentum indicators are starting to increase. The MACD indicator remained above its moving average and the RSI indicator is starting to increase albeit mildly. Furthermore, the Bollinger bands are starting to expand as the index continued to trade near the upper band.

Henceforth, the market is expected to remain bullish and the index is expected to test the 1,830-point resistance level. A breakout above this level could boost market confidence and the index could climb to historical highs, like the other markets provided that oil prices do not decline further. Technically, the market is expected to remain bullish as long as the KLCI can stay above the support level at 1,780 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 4, 2015.