Bursa Malaysia shares fell back into base building mode in April, forcing the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to pull back from a fresh three-month high, after China raised interest rates on rising inflation concerns, increased euro zone woes and lower IMF forecast for global growth. The ruling coalition’s success in securing a two-third majority in the Sarawak state elections, announcement of seven new EPP projects by the PM and the strong ringgit which appreciated to a new 13-year high however failed to kick-start a lack-luster market bent on consolidation.
For the month of April, the FBM KLCI slipped 10.18 points or 0.66% to close at 1,534.95, with losses on IOI Corp (-47sen), Maybank (-21sen), Tenaga (-24sen) and Sime Darby (-21sen) offsetting gains on Genting Bhd (+56sen) and YTL Corp (+17sen). Average daily traded volume and value for April moderated marginally to 1.24bn shares worth RM1.67bn, compared with the 1.25bn and RM1.74bn average in March.
Small cap stocks fell back into hibernation mode, but the FTSE Bursa Malaysia Small Cap (FBMSC) index, a capitalization weighted index of the top 98% of main board stocks, excluding the FTSE Bursa Malaysia 100 (FBM100) index, managed to add 105.61 points, or 0.8% in April to 13,102.1. The FTSE Bursa Malaysia EMAS (FBMEMAS) index, a capitalization weighted index of stocks in the FBM100 and FBMSC, retraced 36.37 points, or 0.3% to 10,576.09. Year-to-date, the FBMSC appreciated 3.78% while the FBMEMAS is up 1.94%.
The table below depicts the performance of KLCI, FBM Emas and FBM Small Cap Indices compared with major global and regional stock indices for the month of April and year-to-date.
The FBM KLCI Stalled Below 1,565 in April
SMA 50-day and 100-day Cushion Downside
The FBM KLCI formed a short-term double-top early last month (Chart 1), peaking at 1,565.04 on 4 April and 1,563.43 on 8 April, prior to a dip to extreme low of 1,514.94 on 19 April, before ending above the 50-day moving average line (in green). The 1,565 high ties in with the 38.2% Fibonacci Projection of the upswing from 1,445 low of Sept 2010 to the previous 1,532 peak of Nov 2010, while downside for the index was adequately cushioned by the 50-day and 100-day (in red) moving averages.
FIBONACCI FAN TARGETS & PROJECTIONS
The April consolidation has forced the signal line on the weekly MACD indicator to hook down again on the weekly chart (Chart 2), suggesting potential further consolidation in May. Nonetheless, a breakout above the January peak of 1,576 is foreseen by the second half of the year, which would lift the index up to record heights. Using the Fibonacci Projection method, upon a successful breakout, the subsequent upside targets are 1,655, 1,704, 1,743, 1,782 and 1,831, which are the respective 23.6%FP, 38.2%FP, 50%FP, 61.8%FP and 76.4%FP of 1,243 low (27 May 2010) to 1,576 high (6 Jan 2011). These projected upside targets are likely to be met as the market trade towards 2012.
Base and Best Case Upside to 1,813/2,043 by Jan 2012
Looking ahead on the monthly KLCI chart below (Chart 3), we maintain our base case upside projection for extended wave (3) rally to target of 1,813, assuming the prior wave 3 rally (from 548 low of April 2001 to 1,525 peak of January 2008) equals the current up-wave from 836 low, that is (1,525 - 548 = 977 + 836 = 1,813). Our best case upside projection is 2,043 by Jan 2012, assuming wave (3) equals 1.236X of wave 3.
Conclusion : KLCI Target 1,813 (Base Case) and 2,043 by Jan 2012 (Best Case)
We maintain that the recent correction from the Jan 2011 peak of 1,576 ended at the double-bottom support of 1,474, confirming our best case scenario for downside termination. As such, the index should resume the wave (3) rally from the March 2009 low of 836, and aim for upside target of 1,813 (base case) and 2,043 (best case) by Jan 2012, assuming wave (3) equals 1.236X of wave 3. The months of May and June were quite mixed, translating to a mixed 2Q performance, but with a reasonable 2% average return for the period.
HAPPY WEEKEND
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