Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on February 26, 2020

The market, benchmarked by the FBM KLCI, continued to fall for a second week. A weak ringgit and Covid-19 epidemic worried market participants. The performance of the Malaysian market was generally in line with other global markets. Economists were worried that the epidemic is most probably going to stunt first-quarter economic growth and beyond.

The KLCI declined 0.9% in a week to 1,531.2 points last Friday. The political turmoil last weekend, which led to the resignation of Prime Minister Tun Dr Mahathir Mohamad, caused the market to plunge this week. The index fell to an eight-year low on Monday and closed at 1,500.88 points yesterday.

Trading volume on Bursa Malaysia was firm last week. The average daily trading volume fell to 2.9 billion shares, compared with two weeks ago. The average daily trading value declined to RM2.1 billion from RM2.3 billion, indicating that more lower-capped stocks, favoured by retail participants, were being traded.

For the KLCI, decliners beat gainers two to one. The top three gainers were Public Bank Bhd (+3% in a week to RM18.14, CIMB Group Holdings Bhd (+2.7% to RM5) and Hong Leong Bank Bhd (+1.6% to RM15.32). The top three decliners were Top Glove Corp Bhd (-9.6% to RM5.29), MISC Bhd (-4.7% to RM7.69) and Hartalega Holdings Bhd (-4.7% to RM5.88).

Global markets were generally bearish amid a growing number of people infected and died because of Covid-19. In Asia, most major market indices closed lower except for Shanghai.

The US dollar was firm against major currencies and the US Dollar Index continued to trade at its highest in nearly a year, increasing to 99.3 points last Friday from 99.2 points two weeks ago. The ringgit weakened to 4.19 against the greenback last Friday, compared with 4.14 the previous week.

As markets were uncertain, investors continued to seek safer investment havens, among which was gold.

Commodity Exchange gold increased 3.8% in a week to US$1,642.45 (RM6,947.56) an ounce last Friday, the highest in seven years. Crude oil continued to increase after a rebound two weeks ago and rose 1.6% in a week to US$58.23 an ounce.

The KLCI was at the psychological support level of 1,500 points despite falling below it on Monday. The immediate technical resistance level is at 1,560 points, while the next support level is at 1,350 points.

Technically, the trend remained bearish below the short- and long term 30-day and 200-day moving averages. The trend has been technically bearish since November 2018. Furthermore, the KLCI was below the Ichimoku Cloud indicator and the Cloud continued to decline, indicating a strong downtrend.

Momentum indicators indicated a strong bearish trend. The Relative Strength Index and Momentum Oscillator fell last week despite showing some signs of divergence the weeks before. Furthermore, the Moving Average Convergence Divergence indicator was below its moving average.

The market may remain uncertain and probably volatile. The next episode of our political saga will be revealed this week and investors, both local and foreign, will be watching closely. Also, global markets are looking at the next development of the Covid-19 epidemic.

Technically, the index may rebound and trade sideways if it can stay above 1,500 points. However, further declines are expected if the index fails to stay above 1,500 points, and the next support levels can only be seen at 1,400 and 1,350 points.


The above commentary is solely used for educational purposes and is the writer’s point of view using technical analysis. The commentary should not be construed as investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment adviser.

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