FBM KLCI expected to decline further

TheEdge Wed, Jun 20, 2018 10:56am - 5 years View Original


The market fell last week ahead of the long holiday weekend. Sentiment was bearish on a weaker ringgit and bearish market performances in the Asian region. The FBM KLCI declined 0.9% in a week to 1,761.78 points last Thursday. The market was closed last Friday for the Aidilfitri holiday. The market continued to fall this week and the index closed at 1,715.36 points yesterday.

Trading volume declined last week on festive season mood. The average daily trading volume fell to 2.3 billion shares from 4.3 billion shares two weeks ago and the average daily trading value fell to RM2.5 billion from RM3.5 billion.

Foreign institutions continued to sell aggressively in the local market last week as the ringgit weakened. Net selling by foreign institutions was RM1,206 million, while net buying by local institutions and local retailers were RM1,115 million and RM91 million respectively.

Among the FBM KLCI component stocks, Hartalega Holdings Bhd, Malaysia Airports Holdings Bhd and Dialog Group Bhd were added, while Astro Malaysia Holdings Bhd, AMMB Holdings Bhd and YTL Corp Bhd were removed.

Last week, decliners beat gainers two to one. Top gainers of the week were Sime Darby Bhd (+4.4% to RM2.60), Axiata Group Bhd (+3% to RM4.77) and Petronas Dagangan Bhd (+2.8% to RM25.82). Top decliners were CIMB Group Holdings Bhd (-5.5% to RM5.97), MISC Bhd (-4.7% to RM5.83) and Hartalega (-3.4% to RM5.98).

Market performances globally were mixed last week. Markets in Asia were generally bearish except for Japan. European markets were mostly bullish, while the US and UK markets fell.

The US dollar strengthened against major currencies after US President Donald Trump-North Korean leader Kim Jong-un met in Singapore last week. The US dollar index closed at 94.9 points last Friday, compared with 93.8 points the week before. The ringgit was firm against the US dollar at RM3.98 per US dollar last Friday compared with the previous week.

Prices of commodities were mostly bearish last week. Crude oil (Brent) fell 4.3% in a week to US$73.04 (RM292.16) a barrel, while the Commodity Exchange gold price declined 1.6% to US$1,282.60 an ounce. In the local market, crude palm oil futures fell 1.2% to RM2,336 per tonne on weak demand.

The FBM KLCI pulled back from the resistance level at 1,801 points two weeks ago. The resistance level was the long-term 200-day moving average. This indicated that market sentiment was still bearish. The immediate support level is at 1,710.0 points. Therefore, the FBM KLCI is near the support level.

Technically, the trend remains bearish as the FBM KLCI has remained below both the short- and long-term 30- and 200-day moving averages. Furthermore, the index is below the Ichimoku Cloud and the Cloud is also bearish.

Momentum indicators like the Relative Strength Index and momentum oscillator are below their mid-levels but have been flat. This indicates a weak bearish momentum. Furthermore, the moving average convergence divergence indicator is above its trigger line or its moving average. Also, the FBM KLCI is trading below but near the middle band of the tightening Bollinger Bands indicator.

With bearish technical indications and a lack of positive catalysts in the market, we expect the FBM KLCI to decline this week. We expect the index to test the resistance level at 1,710 points.


The above commentary is solely used for educational purposes and is the contributor’s point of view using technical 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 adviser.

 

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