The FBM KLCI retreated 24.78 points, or 2.1 per cent to close last week at 1,163.79. Losses in BCHB (-5.23 points for the FBM KLCI), IOI Corp (-4.20), Maybank (-3.00) and Sime Darby (-2.84) contributed about two-thirds to the index's fall for the week. Average daily traded volume and value shrank to 838.1 million shares worth RM1.24 billio respectively, compared with 1.07 billion shares worth RM1.58 billion in the previous week.
The correction in Chinese equities rattled the regional and local equities market last week. With a correction of more than 20 per cent from its recent peak to trough, China is technically in a bear market and that spooked investors and affected market sentiment elsewhere. Extensive credit expansion, government stimulus and positive economic data, although its accuracy is questionable, had driven the Chinese stock market to being one of the best performing markets in the world but it raised concerns about asset price bubbles and indication from the Chinese government to keep a tight rein on credit expansion, especially borrowed money flowing into the equities market. The recent sharp corrections could potentially avert any moves for sudden policy tightening and attempts could be made to stabilise the market.The rally in global equity markets since March was driven by massive stimulus packages and policy interventions that helped to check the slide in economic activities and raised hopes about a global economic recovery. Apart from China, economic data from the US played an important role in determining market direction. Unfortunately, employment, consumption, housing and private investment indicators in the US are only showing signs of stabilisation from a continuous fall and not a positive expansion. The US will announce its preliminary data on second quarter gross domestic product on Thursday which is expected to show a 1.4 per cent quarter-on-quarter contraction on annualised basis.
Locally, we have been hearing more news about private sector initiatives in big ticket items lately than government expansionary measures to meet the goals set under the Ninth Malaysia Plan with only 16 months left to attain the objectives. The latest news concerning a RM44 billion bridge project is mind boggling and adds to the multi-billion-ringgit oil and gas projects announced lately. Too much simultaneous news about big projects with scarce details on sources of funding and detailed studies raised concerns about the feasibility and authenticity of these projects and did little to improve market sentiment.
What is needed to shore up confidence is for the concerned parties, including the government, to put in some concerted effort to kick off one or two big public or private sector projects as soon as possible to show that they really mean business.
While daily technical indicators remain bullish this week and the market may react positively to Wall Street's last Friday performance today, the FBM KLCI is not expected make any significant advance on a week-on-week basis. The market may react positively if Barisan Nasional succeeds in unseating Pas in the by-election for the Permatang Pasir state seat tomorrow and more companies report better-than-expected earnings for the second quarter in the current results reporting season that will end on Friday. As the broader index has surged vigorously in the past five months, last week's corrections are not adequate to neutralise its overbought condition and attract fresh interest. Thus, the Sell-on-Rally call is maintained.
Technical outlookHeavy regional falls last Monday, highlighted by a 3.6 per cent correction in Hong Kong and more than 5 per cent in China's stock market, dampened share prices on Bursa Malaysia. Also weak US consumer confidence data raised concern that a recovery from the global recession will sputter. The FBM KLCI lost 19.52 points or 1.6 per cent that day to close near the session low of 1,168.64 on very negative market breadth. However, stocks recovered from early losses the next day, helped by the overnight rebound on Wall Street due to improved profits from major retailers and strong German investor confidence.
Nonetheless, the market dipped a third day mid-week depressed by further sharp falls in China and Hong Kong on concerns lending restrictions and weak loans growth will stall economic recovery. As a result, the FBM KLCI dipped to an intra-week low of 1,153.97 before closing near session lows. The next day, stocks staged a technical rebound in line with the region following a strong rebound in crude oil prices and better-than-expected second quarter earnings in the region.
The market extended its rebound last Friday, but keen profit-taking and selling interest ahead of the weekend forced share prices to close off early highs.
The daily slow stochastics indicator for the FBM KLCI has hooked up at the oversold region and will trigger a buy signal on further strength (Chart 1), but conversely the weekly indicator flashed a sell signal at the high overbought zone. The 14-day Relative Strength Index (RSI) indicator showed a neutral reading at 54.97, but the 14-week RSI flashed an early hook-down sell signal from overbought territory with a reading of 69.87 as of last Friday.
Meanwhile, the daily Moving Average Convergence Divergence (MACD) trend indicator is declining into a late-stage sell signal, but the weekly MACD indicator continued to claw higher albeit on a less inclining trend. While the 14-day Directional Movement Index (DMI) trend indicator is signalling an uptrend mode, the ADX line dipped for a reading of 43.84.
Conclusion
Conflicting signals from daily and weekly momentum and trend indicators for the FBM KLCI last Friday suggest that stocks should stay congested this week, with weakening buying momentum implying that buyers are unwilling to commit themselves despite the more robust rebound in global stock markets. For the local market to climb higher, it is crucial that buying momentum improve to the 1.5-billion-share mark and above on a daily basis to encourage stronger retail participation in the broader market.
Stock-wise, investors should look to buy on dip AMMB, Axiata, Genting, Genting Malaysia and Maybank for medium-term upside, while lower-liner construction-related stocks MRCB, UEM Land and Zelan are bargains on further dips. Retailers should re-visit oil & gas services stocks such as Kencana, SAAG and Scomi Group on further dips for technical rebound gains, similarly for momentum stocks LCL Corp, Leader and RCE Capital.
As for the KLCI, immediate support is adjusted lower to the 30-day SMA which read 1,156 as of last Friday, with the lower Bollinger band (1,152) and 1,140 acting as stronger support bases . On the upside, immediate upside hurdle will be at the 1,169 to 1,180 region, with 1,190-1,196 as next resistance zone, while the 1,200 formidable resistance will require a strong bullish breakout to boost upside towards 1,220, and then 1,248, which represents the 61.8 per cent FR of the fall from the 1,525 all-time high to the 801 pivot low, which is our best-case upside target for this year.
HAPPY TRADING FOLKS & GOODLUCK2ALL !!!
No comments:
Post a Comment