THE FBM KLCI broke below the support level at 1,836 points two weeks ago and the 200-day moving average at 1,820 points last week. The index fell to 1,798.61 last week and we expected further downside. However, the KLCI rebounded and climbed back above the 200-day moving average on Monday. The rebound was not sustainable and the index fell again below the moving average to close at 1,809.72 points yesterday, 0.6% lower than last week.
Trading volume increased from the previous week as bargain hunters were active when the market fell last week. The average daily trading volume in the past week was 1.9 billion shares compared with 1.7 billion shares two weeks ago. The average trading value was firm at RM1.9 billion. This indicates more lower priced stocks were being traded.
Foreign institutions continued to sell Malaysian shares, which could be due to the weaker ringgit and a slew of political issues surrounding the prime minister and 1Malaysia Development Bhd. From Monday to Friday last week, net selling from foreign institutions was RM537.7 million and RM137.9 million from local retail. Local institutions were net buyers at RM675.6 million.
Gainers outpaced decliners 15 to 13 on the KLCI. The top three gainers were Petronas Chemicals Group Bhd (7.5% from last week), KL Kepong Bhd (3.1%) and Genting Bhd (2.6%). The top three decliners in the index were IOI Corp Bhd (5.5%), Petronas Dagangan Bhd (5.3%) and British American Tobacco Bhd (1.5%).
Performances of global markets were mixed to slightly bullish. In Asia, Japan led the pack. China’s Shanghai Stock Exchange Composite Index rose 0.4% to 4,418.38 points. Japan’s Nikkei 225 index increased 2% to 20,026.38 points. Hong Kong’s Hang Seng Index rose 1% to 27,693.54 points. Singapore’s Straits Times Index increased only 0.3% to 3,454.04 points.
The US dollar started to strengthen this week as the US dollar index rebounded and covered the decline last week. This strengthened the US market which rose to record highs. The US Dow Jones Industrial Average increased 1.1% in a week to 18,298.88 points on Monday. However, London’s FTSE100 declined 0.8% in a week to 6,969.54 points and Germany’s DAX fell 0.7% to 11,594.28 points.
The US dollar index marginally increased from 94.6 points last week to 94.9 points yesterday evening. The ringgit was marginally stronger against the US dollar from RM3.60 per US dollar to RM3.59. Uncertainties in the equity markets boosted gold demand. Commodity Exchange gold jumped 3.6% higher in a week to US$1,225.30 (RM4,398.82) an ounce. The crude oil bullish rally has eased, increasing only 0.5% to US$59.72 per barrel. Crude palm oil in Bursa Malaysia declined 3% in a week to RM2,157 per tonne.
The KLCI remained bearish below the long-term 200-day moving average. The failure to remain above this average after climbing above it last Monday indicates that the sentiment is still bearish. Furthermore, the KLCI has remained inside the Ichimoku Cloud indicator since last week and this indicates uncertainty. A breakout below the cloud, which is at 1,800 points, could turn the trend bearish.
Momentum indicators like the RSI and Momentum Oscillator remained below their mid-level despite a rebound last week. The index also remained below the middle band of the Bollinger Bands indicator. This indicates that the sentiment is still bearish. The pullback from the mid-level yesterday reinforced the bearish sentiment. Furthermore, the movement yesterday formed a bearish reversal pattern.
The market is once again expected to be bearish this week. A weak chart reading, weakening ringgit and rising gold prices point to a bearish market. A breakout below the immediate support level at 1,800 points could lead to further decline and the next support level can only be found at 1,775 points. However, bullish confidence may return if the index can climb above the high in the past one week at 1,823.50 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.
This article first appeared in The Edge Financial Daily, on May 20, 2015.