Thursday, August 11

Market to remain directionless



The market was being supported last week as foreign institutions continued to reduce exposure in the Malaysian market a week after a new government was formed. The FBM KLCI increased 0.4 per cent in a week to 1,854.5 points last Friday.

Trading volume was relatively high as investors started to adjust their investment portfolio. The average daily trading volume jumped to 4.1 billion shares from 1.8 billion two weeks ago and the average daily trading value increased to RM4.3 billion from RM2.3 billion. The value and volume figures also indicate that there are also a lot of retail market participation.

Foreign institutions were selling heavily last week but was supported by both local retail and institutions. Net sell from foreign institutions was RM2,476 million while net buys from local institutions and local retail were RM1,484 million and RM992 million respectively.

In the FBM KLCI, gainers beat decliners two to one. The top gainers for the week were Nestle Malaysia Bhd (5.8 per cent to RM145.00), Maxis Bhd (4.9 per cent to RM5.78) and KLCC Real Estate Investment Trust Bhd (+4.6 per cent to RM7.80). The top decliners were Astro Malaysia Holdings Bhd (15.3 per cent to RM1.55), AMMB Holdings Bhd (5.1 per cent to RM3.53) and Kuala Lumpur Kepong Bhd (3.1 per cent to RM24.60).

Global markets performances were mixed last week. Most markets closed higher except for Hong Kong and Singapore which most likely influenced by the US market. The US Dow Jones Industrial Average fell 0.5 per cent but European markets were generally bullish.

US dollar continued to strengthen against major currencies including the Malaysian ringgit last week. The US dollar Index rose to the highest level in five months at 93.7 points last Friday from 92.5 points the week before. The ringgit was at its lowest in four months last Friday at RM3.97 as compared to RM3.95 the week before.

Crude oil prices continued to increase on Iran tension. Crude oil (Brent) increased 2.0 per cent in a week to US$78.70 a barrel. Gold price continued to fall last week. Gold (COMEX) declined 2.0 per cent in a week to US$1,291.75 an ounce. It broke the crucial support level at US$1,300 and hence further downside is expected for gold. In the local market, crude palm oil futures fell 2.9 per cent to RM2,449 per metric tonne.

The FBM KLCI rebounded from the support level at 1,800 points towards to the resistance level at 1,880 points last week. This trading range is the support and resistance level of the long term bullish trend correction that began in December 2017.

Technically, the trend is bullish in the short term. The FBM KLCI climbed above the short term 30-day moving average and the index is above the Ichimoku Cloud. However, the whipsaw against the short term 30-day moving average indicates uncertainty.

Momentum indicators has increased in the past one week and this indicates a weak bearish momentum. The RSI and Momentum Oscillator indicators have increased but slightly below its mid-level. Also, the MACD has increased but has not climbed above its moving average or perform a golden cross.

The market is still in a correction on uncertainty as the market is still trying to adjust their portfolio after one week of a new government administration. Technically, we expect the market to continue in a directionless trend as long as the FBM KLCI stays between 1,800 and 1,870 points.

The above commentary is solely used for educational purposes and is the contributor’s point of view using technical al analysis. The commentary should not be construed as an investment advice or any form of recommendation. Should you need investment advice, please consult a licensed investment advisor.