How Low Can The Malaysian Bourse Go?

The benchmark FBMKLCI dropped deeper last week, sliding to hit a 30-month low of 1,373 on Thursday before stopping at 1,382 last Friday. This represents a week-on-week decrease of 23.5 points or 1.7%. Over on Wall Street, after a choppy week, the Dow settled at 29,635 for a weekly gain of 338.0 points or 1.2%.

As losers outnumbered rising counters in three of the four trading days, the daily average turnover on the local stock exchange stood at 2.1b shares in volume and RM1.7b in value, versus the preceding week’s average of 2.2b shares worth RM1.5b. During the holiday-shortened week, foreign investors continued to sell more shares than they had bought with net weekly outflows of RM480m. This was countered by net weekly buying trades from domestic institutions and local retailers.

The coming week will see more domestic-centric news flows in the pipeline. On the corporate front, Sunview Group is slated for listing on the ACE Market today. There will also be quarterly financial results announcements from the likes of LPI Capital, Axis REIT, and Digi.Com. In terms of macro data, the September external trade statistics and the September Consumer Price Index are due for release. Yet, all eyes will be on the Election Commission’s scheduled meeting on Thursday when the
polling date for the 15th general election will be decided.

In the absence of fresh morale-boosting news, investors will probably stay on the sideline for the time being as the nervous
market sentiment carries over from last week. Driven by the renewed selling pressure, the FBMKLCI was dragged down mainly by Maybank, Axiata Group, and Public Bank. There was also no escape for the FBM 70 Index, FBM Small Cap Index, FBM Fledgling Index, and FBM ACE Index with technology, energy, and construction being the worst hit while only the healthcare and REIT sectors posted positive returns during the week.

From a technical perspective, following the failure of the FBMKLCI to overcome 1,395, a threshold that coincides with the
61.8% Fibonacci retracement level and is now the research house’s immediate support-turned-resistance hurdle, the benchmark index could face further downside risk, possibly sliding towards the first support line of 1,355. This comes as the prevailing downward pattern indicators are signalling an extended negative bias after hitting a fresh multi-year low of 1,373
last week.

On Wall Street, the momentum indicator is still showing a negative bias. In view of the existing mixed technical signals, the Dow will probably continue to fluctuate between our first support and resistance thresholds of 28,900 and 30,600.

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