This article first appeared in The Edge Financial Daily on February 19, 2020
Market trends were generally bullish last week but the Malaysian market was not in line with global market performances. The benchmark FBM KLCI was supported by glovemakers but was weighed down by banking stocks after Bank Negara Malaysia hinted at possible rate cuts and announced lower-than-expected gross domestic product growth in the fourth quarter of 2019.
The KLCI declined 0.7% in a week to 1,544.46 points last Friday. The market has continued to be weak this week and the index closed at 1,537.08 points yesterday.
Trading volume on Bursa Malaysia declined last week. The average daily trading volume fell to 2.9 billion shares, compared with 3.3 billion two weeks ago. The average daily trading value declined to RM2.3 billion, compared with RM2.6 billion.
For the KLCI, gainers pared decliners. The top three gainers were Hartalega Holdings Bhd (+6.4% in a week to RM6.17), Top Glove Corp Bhd (+3.4% to RM5.85) and Maxis Bhd (+1.7% to RM5.63). The top three decliners were Hong Leong Financial Group Bhd (8.3% to RM15.84), Hong Leong Bank Bhd (-6.3% to RM15.08) and CIMB Group Holdings Bhd (-5.5% to RM4.87).
Global markets were generally bullish despite the Covid-19 scare. In Asia, most major market indices closed higher except for Japan and Malaysia. In the West, most markets were up except for London’s FTSE 100 Index.
The US dollar strengthened against major currencies and the US Dollar Index rose to its highest in nearly a year, increasing to 99.2 points last Friday from 98.7 points two weeks ago. The ringgit was firm at 4.14 against the greenback last Friday.
Gold continued to trade near its seven-year high on market uncertainties. Commodity Exchange gold increased 1.2% a week to US$1,586.65 (RM6,584.60) an ounce last Friday. Crude oil rebounded from a six-month low and increased 5.5% in a week to US$57.44 an ounce.
The KLCI remained below its major support level at 1,550 points, indicating that the sentiment remained bearish. Despite the rebound two weeks ago, the index failed to follow through last week and formed resistance at 1,560 points. The next support is at 1,490 points.
Technically, the trend remained bearish below the short- and long-term 30-day and 200-day moving averages. The trend had been technically bearish since November 2018. Furthermore, the KLCI was below its Ichimoku Cloud indicator and the Cloud continued to decline.
Even so, the momentum of the bearish trend was weak. Momentum indicators like the Relative Strength Index and Momentum Oscillator showed a positive divergence last week. The Moving Average Convergence Divergence indicator also started to rise above its moving average.
The market may continue to face uncertainties in the next few weeks as more corporate earnings are announced. The market is also closely monitoring the Covid-19 outbreak and other economic figures globally. Hence, if the KLCI fails to climb above its immediate resistance at 1,560 points, further downside towards the next support level at 1,490 points is expected.
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.