BURSA MALAYSIA remained weak in the past week as market sentiment continued to be bearish on lack of catalysts and continued foreign selling. Weak regional market performances added more uncertainty in the local market. Trading volume also declined as investors stayed on the sidelines and cautious ahead of the national budget. The market normally has a pre-budget rally but this time around that may not be the case. A weaker ringgit and anticipation of further increases in interest rates dampened market confidence. The benchmark FBM KLCI declined 0.7% in a week to 1,833.54 points despite a bullish start yesterday after a holiday on Monday.

Average daily trading volume declined to 2.1 billion shares in the past week compared with 2.6 billion shares two weeks ago. Average daily trading volume declined from RM2.2 billion two weeks ago to RM1.9 billion. There is an indication that the market is getting more cautious and there was a lack of buying support. Foreign institutions continued with their selling spree despite the ringgit gaining some ground against the US Dollar.

Net selling from foreign institutions last week was RM334 million. Local institutions’ net buying was RM356.7 while retail net selling was RM22.5 million. In the KLCI, decliners outnumbered decliners 11 to three. Gainers were led by Telekom Malaysia Bhd (+3.9%), Tenaga Nasional Bhd (+1.6%) and Axiata Group Bhd (+0.9%) and decliners in the index were SapuraKencana Petroleum Bhd (-6.3%), British American Tobacco(M) Bhd (-4.9%) and IOI Plantation Group Bhd (-4.6%).

Markets in Asia continued to stay bearish in the past week and from the charts, the bearish trend is set to continue. Singapore’s Straits Times Index declined 0.9% in a week at 3,247.00 points. The Hang Seng Index rebounded last week after a sell-off before the holidays caused by the ongoing pro-democracy protests. The Hang Seng Index rose 2.1% in a week to 23,422.52 points. China’s market is still closed for a week-long holiday. Japan’s Nikkei 225 continued to decline, falling 2.4% in a week to 15,783.83 points.

The US market was bearish in the earlier part of last week but strongly rebounded to recover the loss as the US dollar halted its bullish rally. The US Dow Jones Industrial Average eventually declined only 0.6% in a week to 16,991.91 points on Monday after rebounding from 16,801.05 points. London’s FTSE100 Index declined 1.2% in a week to 6,563.65 points and Germany’s DAX fell 2.2% to 9,209.51 points. The US Dollar Index remained firm at 86.04 points compared with last week.

Gold prices remained bearish as the greenback remained strong. Commodity Exchange gold declined 0.7% in a week to US$1,207.20 (RM3,935.47) an ounce. Crude oil declined after a strong rally two weeks ago. New York Mercantile Exchange WTI Crude fell 4.1% to US$90.45 per barrel, erasing gains made two weeks ago. Crude palm oil stayed pulled back for a correction as the ringgit stayed firm. Crude palm oil futures on Bursa declined 1.6% in a week to RM2,180 per tonne. The ringgit slightly strengthened against the greenback at RM3.26 as compared to RM3.27 a week ago.

Technically, the KLCI remained bearish below both the short- and long-term 30- and 200-day moving averages. These averages were at 1,852 (200-day average) — 1,855 (30-day average) points. The index failed to climb above the long-term moving average after testing it last week and this indicates that market confidence was still weak. Furthermore, the index was also below the Ichimoku Cloud indicator which is currently at 1,865 points.

Momentum indicators like the RSI, Momentum Oscillator continued to indicate that the bears are still in control as the indicators were below their mid-levels. After rebounding last week, these indicators started to decline after failing to climb above their mid-levels. The MACD indicator remained below its moving average and this also indicates that the trend was bearish. Furthermore, the KLCI was still below the middle band of the Bollinger Bands and near the bottom band.

The indicators show that the KLCI is set to trend lower. The US dollar may start trending upwards again after the correction ends and this will not be in favour of the local currency and equity market. It has also tested the support level at 1,840 points once again and closed below it yesterday. Henceforth, we expect this bearish momentum to continue this week and the index to decline to the support level at 1,820 points based on the bottom band of the Bollinger Bands indicator. The market is expected to stay bearish as long as it stays below the immediate resistance level between 1,855 and 1,860 points.

Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia committed to offering the best services to a wide range of customers. 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 October 8, 2014.