This article first appeared in The Edge Financial Daily, on May 11, 2016.

The market fell for the third week last week as market sentiment was weak due to bearish global markets’ performances, the weak ringgit and slide in China’s manufacturing data. However, the market was supported towards the end of the week after Malaysia registered a 12.2% increase in its trade surplus for the first quarter to RM23 billion, above market expectations. The FBM KLCI declined 1.4% in a week to 1,649.36 points.

The market was rather quiet last week as traders and investors were cautious. The average daily trading volume in the past one week fell sharply to 1.6 billion shares compared with 2.4 billion shares two weeks ago. The average trading value fell from RM2.5 billion to RM1.9 billion. 

Foreign institutions continued to exit the market as the ringgit weakens. Net selling from foreign institutions last week (Tuesday to Friday) was RM623 million, and net buying from local institutions and local retailers were RM538 million and RM85 million respectively. The ringgit weakened from 3.91 to the US dollar to 3.99 in a week.

Only four out of 30 counters closed higher in a week in the FBM KLCI. Top gainers for the week were British American Tobacco (M) Bhd (+2.4% in a week to RM47.00), Westports Holdings Bhd (+1.7% to RM4.22) and Public Bank Bhd (+1.4% to RM18.96). Top decliners were Petronas Chemicals Group Bhd (-4.5% to RM6.41), Kuala Lumpur Kepong Bhd (-3.9% to RM22.98) and Genting Bhd (-3.9% to RM8.50).

Markets in Asia remained bearish. China’s Shanghai Stock Exchange Composite index fell 0.8% in a week to 2,913.41 points last Friday. Hong Kong’s Hang Seng Index declined 4.5% in a week to 20,109.87 points and Singapore’s Straits Times declined 3.8% to 2,730.8 points. The Nikkei 225 index fell 3.3% in a week to 16,106.72 points.

The US and European markets pulled back for a correction last week, but found some support towards the end of the week. The US Dow Jones Industrial Average declined 0.2% in a week to 17,740.63 points last Friday. Germany’s DAX Index fell 1.7% in a week to 9,869.95 points, and London’s FTSE 100 fell 1.9% to 6,125.7 points last Thursday.

The US Dollar Index rebounded from its eight-month low last week to marginally higher. The US Dollar Index futures closed at 93.9 points last Friday after rebounding from a low of 91.9 points the previous week. Crude oil pulled back for a correction after hitting a six-month high two weeks ago. US crude oil (WTI) declined 3.1% in a week to US$44.56 (RM180.47) a barrel. Comex gold fell marginally lower from last week to US$1,289.70 an ounce. Crude palm oil on Bursa Malaysia rebounded 1.5% in a week to RM2,632 per tonne.

The FBM KLCI remained bearish below the 30-day moving average and was unable to be supported above the 200-day moving average last week. The index also fell below the Ichimoku Cloud indicator. This indicates a bearish trend.

Momentum indicators continued to indicate strong bearish momentum. The RSI and MACD indicators continue to fall with the FBM KLCI trading at the bottom band of the Bollinger Bands indicator. However, the oscillators are also indicating that the index is at oversold levels. We saw some support late last week and a bullish key reversal chart pattern was formed last Friday, and hence a technical rebound is expected.

We mentioned last week that if the index failed to rebound, we expect the FBM KLCI to fall towards 1,600 points by the end of this month. We expect this to happen if the index failed to rebound again this week. Expect another quiet week on Bursa Malaysia as the market may continue to stay cautious in a bearish global market trend. If the market rebounds, it should test the 200-day moving average at 1,667 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.