The FBM KLCI fell and closed at its lowest level since January 2016 last Friday. Market sentiment remained bearish despite Bank Negara Malaysia’s decision to lower the overnight policy rate to 30% from 3.25%, the first decline since July 2016. We saw the market rebound from a downtrend in July 2016 but eventually closed lower that year.

The KLCI fell 1.7% in a week to 1,610.27 points. The index continued to fall this week and closed at 1,599.19 points yesterday, the lowest since September 2015.

Trading volume remained firm. The average daily trading volume declined slightly to 2.6 billion shares last week from 2.7 billion shares the week before. The average daily trading value also remained almost unchanged at RM2 billion.

Foreign institutions remained net sellers last week as confidence grew weaker on economic growth and the ringgit’s exchange rate against the US dollar. Net selling by foreign institutions was RM450.9 million. Net buying by local institutions and retailers were RM285.2 million and RM165.7 million respectively.

For the KLCI, decliners beat gainers 13 to two. The three telecommunications companies and Petronas Dagangan Bhd were the only gainers. The top three gainers were Axiata Group Bhd (+8.7% in a week to RM4.39), DiGi.Com Bhd (+3.8% to RM4.69) and Maxis Bhd (+0.8% to RM5.36). The top three decliners were Sime Darby Bhd (-6.4% to RM2.20), Malaysia Airports Holdings Bhd (-5.9% to RM7.15) and IOI Corp Bhd (-4.9% to RM4.24).

Global markets fell last week on renewed US-China trade spats. In Asia, the Hong Kong market took the lead with a 5% decline in the Hang Seng Index. US and UK benchmark indices fell 2%, while in Europe, France’s CAC 40 index took the lead with a 4% decline.

The US dollar remained firm against major currencies last week. The US dollar index fell to 97.3 points last Friday from 97.5 points in the previous week. The ringgit weakened to 4.15 per US dollar compared with 4.14 in the previous week.

Commodities prices closed marginally higher. Commodity exchange gold futures rose 0.5% in a week to US$1,286.80 (RM5,365.96) an ounce last Friday. Crude oil (Brent) was closed almost unchanged at US$70.86 a barrel. Crude palm oil (BMD) declined 1.1% in a week to RM1,984 per tonne, the lowest in a year on high inventory levels.

The index has failed to rally after testing the short-term 30-day moving average in the past two weeks. This indicates that market confidence is still weak and the bears are still in control. The index remains bearish below both the short- and long-term 30- and 200-day moving averages. Furthermore, the index is below the Ichimoku Cloud indicator and the Cloud is expanding downwards.

The bearish trend momentum has been weak in the past two weeks but started to turn south to indicate strengthening of the bearish momentum. The Relative Strength Index and momentum oscillator have fallen after failing to climb above their mid-levels in the past one week. The Moving Average Convergence Divergence indicator has fallen below its moving average and this also indicates a stronger bearish momentum.

With a bearish market sentiment and strengthening of the bearish trend momentum, the KLCI is expected to decline further. The index has broken below the support level at 1,610 points and hence may decline further to the next support level at 1,540 points.

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