THE market started on a bullish note when it opened after a holiday last Wednesday as bullish market performances boosted confidence. A rebound in crude oil prices and a stronger ringgit provided the added confidence. However, the benchmark FBM KLCI pulled back as the market took the opportunity to book profits and the index started trading sideways throughout the week until yesterday. The KLCI finally increased 1.7% in a week (from the previous Friday before the holidays) to 1,811.12 points after trading in a range between 1,796.41 and 1,831.41 points.
Average daily trading volume increased from two billion shares two weeks ago to 2.2 billion shares in the past week. Average daily trading value fell from RM2.6 billion to RM2.3 billion. Foreign institutions started buying in the past week after weeks of being net sellers. Net buying from foreign institutions (Wednesday to Friday last week) was RM268.6 million, while net selling from local institutions and retail were RM162.8 million and RM105.8 million respectively.
On the KLCI, gainers outweighed decliners two to one. The top three gainers in the index were Sapurakencana Petroleum Bhd (9.7% from last week), Astro Malaysia Holdings Bhd (6.9%) and British American Tobacco (M) Bhd (6.1%). The top three decliners were Felda Global Ventures Holdings Bhd (3.3%), Maxis Bhd (2.1%) and YTL Corp Bhd (1.7%).
Markets were generally bullish but cautious on quantitative easing measures in the eurozone. The Shanghai Stock Exchange Composite Index declined 2.2% from Jan 30 to 3,141.27 points. Hong Kong’s Hang Seng Index increased only 0.1% to 24,528.10 points. Japan’s Nikkei 225 closed marginally lower at 17,652.68 points. Singapore’s Straits Times Index increased 1.2% in a week to its highest level in 20 months to 3,434.24 points. Please note that the changes are from Jan 30, 2015.
On Monday, the US Dow Jones Industrial Average increased 3.3% from Jan 30 to 17,729.21 points. London’s FTSE100 index rose 1.2% to 6,845.86 points but Germany’s DAX Index declined 0.3% to 10,663.51 points after pulling back from a record close at 10,911.32 points last week. The US dollar was marginally lower, falling from 95 points on Jan 30 to 94.6 points. The ringgit gained some strength against the greenback, from 3.63 to 3.58 to a US dollar.
Gold continued to decline as the US dollar remained strong and equity markets were favourable. Commodity Exchange gold declined 3.5% from Jan 30 to US$1,238.20 (RM4,407.99) an ounce. New York Mercantile Exchange West Texas Intermediate crude oil increased 9.6% to US$52.43 per barrel. Crude palm oil (CPO) rebounded after weeks of decline on a rebound in crude oil prices. CPO futures on Bursa Malaysia rose 7.1% in a week to RM2,300 per tonne.
The KLCI tested the long-term 200-day moving average after it gapped up last Wednesday but failed to break above this level. This indicates that the market is still being cautious despite the strong bullish momentum in the short term. The movement in the past week indicates uncertainty, but nevertheless it is still bullish in the short term as the index is above the 30-day moving average and the index remained above the Ichimoku Cloud indicator.
The momentum of the bullish trend continues to strengthen. The MACD indicator continues to increase and this indicates that the sentiment is still bullish. The expanding Bollinger bands and the index above its middle-band also indicate that there is still strength in the current momentum. However, the more sensitive RSI indicator is starting to move sideways, indicating a weakening momentum.
We are still seeing the KLCI struggling to break the downtrend line and 200-day moving average resistance level. If the index fails to break above this level in the next one or two weeks, we may see a pullback as market confidence weakens. The chances of the KLCI climbing higher are great if it can stay above 1,800 points and a breakout above 1,830 points, which is the resistance level it is struggling to overcome, could catapult the index to historical highs this year. The immediate support level for the current bullish trend is at 1,780 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 February 11, 2015.