Market still directionless

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This article first appeared in The Edge Financial Daily, on December 7, 2016.


The market was directionless in the past one week. The market was supported by rising crude oil prices and a stronger ringgit. The bearish sentiment was fuelled by uncertainty over the economic growth. The FBM KLCI once again traded sideways with a narrow trading range. The index increased only 0.1% in a week to 1,628.96 points after trading between 1,616.08 points and 1,632.23 points.

Trading volume was slightly increased last week. The average daily trading volume last week was 1.5 billion shares as compared with 1.4 billion shares two weeks ago. Total market valuation shrank RM5.6 billion from the previous week to RM1,651 billion last Friday.

Foreign institutions continued to sell as the ringgit remained weak. Net sell from foreign institutions last week was RM781 million. Local retail participants were also net sellers at RM38 million. Net buy from local institution was RM818 million. The ringgit was at RM4.44 last Friday as compared with RM4.45 in the previous week.

For the FBM KLCI, gainers marginally outpaced decliners 16 to 14. Top gainers for the week were Sapurakencana Petroleum Bhd (+5.6% in a week to RM1.52), AMMB Holdings Bhd (+2.4% to RM4.29) and Maxis Bhd (+1.7% to RM5.96). Top decliners were Petronas Gas Bhd (-2.4% to RM20.84), Astro Malaysia Holdings Bhd (-1.9% to RM2.64) and Petronas Dagangan Bhd (-1.8% to RM23.16).

Market performances in Asia were mixed. China’s Shanghai Stock Exchange Composite Index declined 0.5% in a week to 3,244.48 points last Friday. Hong Kong’s Hang Seng Index fell 0.7% to 22,564.82 points. Japan’s Nikkei 225 index increased 0.2% in a week to 18,426.08 points and Singapore’s Straits Times increased 2.1% to 2,919.37 points.

The US market continued to rise but at a weaker momentum and European markets were mostly down. The US Dow Jones Industrial Average increased only 0.1% in a week to 19,170.40 points last Friday. London’s FTSE 100 fell 1.4% in a week to 6,740.59 points and Germany’s DAX Index also declined 1.4% to 10,527.52 points.

The US Dollar index pulled back from its 13-year high last week. The index increased from 101.5 points two weeks ago to 100.9 points last Friday. Gold price (Comex) declined 0.5% in a week to US$1,177.80 an ounce. Crude oil (Brent) jumped 15.6% in a week to US$54.46 per barrel after Opec decided to cut output. Crude palm oil on Bursa Malaysia increased 1.5% in a week to RM3,076 per tonne.

The FBM KLCI is still directionless as it stayed within the triangle chart pattern. The pattern indicates a consolidation of a down trend as the index is bearish below the short-term 30- and 200-day moving averages and the Ichimoku Cloud indicator. The immediate support for the sideways trend is at 1,610 points and the resistance is at 1,630 points.

Momentum indicators continued to move sideways as the index was directionless in the past three weeks. The narrowing Bollinger Bands also indicates a weak momentum. This indicates that the market is still directionless. However, the bearish trend may strengthen if the index falls below the immediate support level at 1,610 points.

The market is expected to continue to be directionless if the FBM KLCI trades between 1,610 points and 1,630 points. We may see some support in the oil and gas sector after last week’s surge in crude oil prices. However, the continuous selling by foreign institutions may weigh the market down. If the index breaks below 1,610 points, then we are expecting the index to test the next support level at 1,610 points. However, a climb above 1,630 points signals a trend reversal and the index may climb to 1,650 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.