MARKET confidence grew stronger in the past week as the index broke another resistance level, a week after it broke an earlier resistance level. The index rose to its highest level this year and in five months. The market was boosted by a stronger ringgit and rising crude oil prices. Banking stocks rebounded quite well as the market is expecting easy monetary policies from the central bank after the US Fed’s indication to raise interest rates later rather than sooner. The FBMKLCI rose 1.4% in a week to 1,856.51 points.
Trading volume slightly increased. The average trading volume in the past week was 2.2 billion shares compared with 2.1 billion shares two weeks ago. However, average daily trading value fell to RM1.9 billion from RM2 billion two weeks ago. This shows that lower market cap stocks which are favoured by retail investors were the main focus. Local retail investors were the main net sellers last week and foreign institutions were the net buyers.
Net buying from foreign institutions last week (Monday to Friday) amounted to RM203.8 million while net selling from local institutions was RM37.5 million, and local retail net selling was RM166.3 million. In the KLCI, gainers trounced decliners 4 to 1. The top three gainers were MISC Bhd (+5.8% from last week), Petronas Dagangan Bhd (+5.1%) and Telekom Malaysia Bhd (+4.5%). The top three decliners were Felda Global Ventures Holdings Bhd (-3.2%), Sapurakencana Petroleum Bhd (-1.7%) and Petronas Chemicals Group Bhd (-1.2%).
Asian markets continued to be bullish, led by China which continued to rise to its seven-year high. China’s Shanghai Stock Exchange Composite Index jumped 5.6% in a week to 3,960.98 points. Japan’s Nikkei 225 increased 2.2% to 19,640.54 points. Singapore’s Straits Times increased only 0.5% to 3,465.62 points but it is at its highest level in more than seven years. Hong Kong was closed in the past few days for holidays but the Hang Seng Index was at 25,275.64 points last Thursday, near its seven-year high at 25,318 points.
The US market was uncertain in the past week as the US dollar started to weaken against a basket of major currencies. On Monday, the US Dow Jones Industrial Average declined 0.5% to 17,880.85 points. Germany and UK markets were closed till yesterday. Last Thursday, Germany’s DAX Index declined 1.1% from the previous week to 11,967.39 points and London’s FTSE100 index declined 1.1% to 6,818.87 points.
The US Dollar Index fell to a one-month low from 98.28 points a week ago to 96.96 points. This helped strengthen the Malaysian ringgit from RM3.70 per US dollar last week to RM3.63. COMEX gold rebounded on the weak US dollar and increased 2.5% in a week to US$1,214.20 (RM4,407.54) an ounce. Crude oil (Brent Crude) rose 3.2% in a week to US$58.12 per barrel. Crude palm oil futures in Bursa Malaysia turned bullish after weeks of uncertainty and increased 2% in a week to RM2,208 per tonne.
The breakout above resistance levels in the past two weeks showed good market confidence. The trend is now bullish in both the short and long term as the index is above the 30- and 200-day moving averages. The 30-day moving average is converging with the 200-day moving average and this indicates strong bullish momentum. Furthermore, the KLCI is above a wide Ichimoku Cloud indicator and this indicates a good bullish trend.
Momentum indicators like the RSI and Momentum Oscillators continue to increase and this also indicates strong bullish momentum. Furthermore, the KLCI is trading above the top band of the Bollinger Bands. However, these indicators are now moving towards their overbought levels and this provides short-term profit-taking opportunities. Therefore, the market may be a little cautious.
The market is strongly bullish and this momentum is likely going to sustain in the short term and push the KLCI to historical highs near the 1,900 level. There are no signs of reversal yet but we may expect the market to be cautious this week and a minor pull back may occur. The market may continue to trend upwards once this minor correction is over if the index is able to be supported above 1,840points. Stock focus this week are banking stocks as we have seen good rallies in this sector for the past week.
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 April 8, 2015.