The Malaysian bourse could be entering a consolidation mode following two straight weeks of gains. The benchmark
FBMKLCI added 26.4 points or 1.8% last week to settle at 1,492 on Friday, not far from its intra-week high of 1,498. Over on
Wall Street, the DJIA continued its rebound with a weekly increase of 945.8 points or 3.0% before stopping at 32,845.
Spurred by a positive market breadth in three of the five trading days, daily average turnover on the local stock exchange
widened to 2.4b shares in volume and RM1.5b in value from 2.2b shares worth RM1.4b in the previous week. Foreign
investors remained net buyers with net weekly inflows of RM153m, absorbing the net selling trades by domestic institutions
and retail investors (amounting to RM71m and RM82m, respectively). Consequently, for the whole of July, foreigners logged
aggregate net inflows of RM182m, in contrast to June’s monthly outflows of RM1.28b.
After climbing 3.3% in July, what’s next for the FBMKLCI? Statistically, there is an even chance for the bellwether to show
positive returns in the coming month. Since 2012, the index had ended higher in August in five of the last 10 years (including the most recent year) with an average monthly return of minus 0.3%.
With global equities showing signs of stabilising in reaction to hints of a slower pace of interest rate hikes by the US Federal
Reserve last week, “no news may be good news” for now. For the week ahead, the calendar of events is fairly quiet on the
macro front with just the Malaysia Manufacturing PMI scheduled to be out later today. In terms of corporate news flows, the
slate of quarterly financial results announcements continues from the likes of MR D.I.Y. (on Thursday). And on Friday, there
will be a new listing on the ACE Market by Unique Fire Holdings – which is principally involved in the assembly, manufacture
and distribution of fire protection systems, equipment, and accessories; valued at a market cap of RM104m based on an IPO
offer price of RM0.26 per share.
Following recovery from the closing low on 13 July, which then lifted the FBMKLCI by 80.9 points or 5.7%, investors may be on the lookout for rotational plays ahead. During the same timeframe, the mid-, small- and micro-caps – as tracked by the FBM70 Index (+6.0%), the FBM Small Cap Index (+5.5%), the FBM Fledgling Index (+3.8%), and the FBM ACE Index
(+6.8%) – all saw positive returns. By sector, the leading performers were technology (+15.9%), industrial products &
services (+10.6%) and energy (+8.5%) while REIT (+2.3%), consumer products & services (+3.3%) and transportation &
logistics (+3.9%) were the main laggards.
Technically speaking, on account of the run-up since mid-July, are we in the midst of a trend reversal, or is it just a bear
market rally? For the time being, after crossing above the short-term 50-day SMA, we reckon the FBMKLCI could be
digesting its recent gains, possibly swinging with a marginal upward bias inside our immediate support and resistance range
of 1,475 (S1) and 1,510 (R1). On the chart, an extension of the upward trajectory may be forthcoming when the key market
barometer crosses above R1 convincingly first (to be backed by stronger trading activity) before advancing towards our next
resistance threshold of 1,550 (R2).
In the US, riding on the prevailing Parabolic SAR uptrend, the DJIA may strive to continue its bullish momentum and extend a little more its recent rally ahead. Our first support and resistance levels now stand at 32,350 (S1) and 33,200 (R1),
By Goh Yin Foo Kenanga