The Malaysia stock market picked up less than a single point on Friday. But that was enough to end the four-day losing streak in which it had dropped more than 25 points or 1.8 percent. The Kuala Lumpur Composite Index now rests just above the 1,400-point plateau and it’s likely to accelerate on Monday.
At 9.15am, the FBM KLCI opened at 1405.68.
RHB Retail Research, in a note today (May 29) said last Friday, the FKLI managed to stage a mild rebound, recouping 0.5 pts to close at 1,401.50 pts – retaining its position above the 1,400-pt psychological support. The index initially opened at 1,401.50 pts.
After trading between 1,405.50 pts and 1,396 pts, it closed at 1,401.50 pts. The index charted a candlestick with long lower shadow, showing the 1,400-pt level acting as a strong support. For the immediate session, the index may consolidate sideways along the 1,400-pt level, eyeing to stage a counter-trend rebound towards the 1,425-pt level.
Meanwhile, the 50-day SMA line is still trending lower, putting downward pressure on the index. However, breaching the 1,425-pt resistance would signal that the bullish momentum is gaining strength. For now, the bearish structure remains intact and downside risk prevails. As such, we will hold on to our negative trading bias.
Traders are recommended to hold on to the short positions initiated at 1,414 pts, or the close of 10 Mar. To mitigate the trading risks, the stop-loss is fixed at 1,437 pts.
The nearest support stays at 1,400 pts, followed by 1,382 pts, or the low of 16 Mar. Meanwhile, the immediate resistance is kept at 1,425 pts, followed by 1,437 pts, or the close of 3 Apr.
Kenanga Research cited Following last week’s broad market weakness, a test of resilience awaits the Malaysian bourse in the presence of renewed selling pressure. For the week just ended, the benchmark FBM KLCI closed lower day-to-day except for Friday, hitting a low
of 1,398 before stopping at 1,403 last Friday.
This translated to a weekly loss of 25.6 points or 1.8%. In the US, the DJIA tumbled 333.3 points or 1.0% through the week to finish at 33,093.
While market breadth stood negative on all the five trading days, daily turnover on the local stock exchange averaged at 2.5b shares in volume and RM1.8b in value, compared with the prior week’s average of 2.7b shares worth RM1.6b. During the week, both foreign investors and domestic institutions were net sellers (registering net weekly outflows of RM59m and RM32m, respectively) which were matched by net buying trades from local retailers (amounting to RM91m).
With just three more trading days remaining in May, the FBM KLCI (down 0.9% month-to-date) may end the month in the red. Kenang said as mid-year approaches, in slightly more than a month from now, it remains to be seen if there will be a reversal of fortune next month. Statistically, the bellwether had finished in positive territory in June in five of the past 10 years – notwithstanding that the two most recent years recorded monthly losses – with an average monthly return of negative 1.1% since 2013. Yet, and interestingly, the FBM KLCI’s May performance (regardless of positive or negative returns) tends to carry over to June based on its historical pattern in nine of the last 10 years. If history repeats itself, this suggests then the monthly losing streak could persist in June.
A hectic week lies ahead with plenty of news flows to keep investors busy. As we enter the tail-end of the corporate earnings reporting season – which thus far has seen more disappointments than pleasant surprises – the final batches of quarterly financial results announcements will come in on: (i) Monday from the likes of Tenaga, AMMB, IJM Corporation, Oppstar, LGMS, D & O Green Technologies, Mah Sing, Ann Joo, BAT (Malaysia), MRCB, KLCC, (ii) Tuesday – Alliance Bank, Malaysia Airports, KPJ Healthcare, Capital A, IOI Corporation, FGV, QL Resources, OCK, Kimlun, SKP Resources, and (iii) Wednesday – CIMB, Hong Leong Bank, Press Metal, IHH Healthcare, PPB Group, GHL Systems, JHM Consolidation.
On the IPO calendar, three companies will be making their debut listing, namely: (i) Cloudpoint Technology (which is principally engaged in the provision of IT solutions) on the ACE Market today (at a market cap of RM202.0m based on an IPO offer price of RM0.38 per share), (ii) Radium Development (a property developer focussing on the development of high-rise residential properties) on the Main Market on Wednesday (at a market cap of RM1.73b based on an IPO offer price of RM0.50 per share), and (iii) Synergy House (in the business of design, development and sale of ready-to-assemble home furniture) on the ACE Market this Thursday (at a market cap of RM215.0m based on an IPO offer price of RM0.43 per share).
On Thursday too, the outcome of the semi-annual review of the FBM KLCI constituents will be revealed with any changes coming into effect on 19 June (Monday). Based on last Monday’s market cap ranking, using the individual closing share prices, Inari (in the 39th position) may be replaced by Westports (in 28th position). In terms of macro data, the April banking industry statistics are scheduled for release on Wednesday to be followed by Malaysia Manufacturing PMI report on Thursday.
Overseas, all eyes will be on the progress of the ongoing negotiations to raise the US national debt ceiling with a deal likely to be struck sometime this week according to street opinion. Any other outcome to emerge from the existing political stalemate is expected to trigger a domino effect on the global economy and financial markets in view of an unprecedented US federal government debt default in the beginning of June. Separately, the US May employment report – which will provide an insight into the latest inflationary environment – is due to be out on Friday.
Amid the sluggish underlying sentiment, selling activity on our domestic stock market may carry on for the time being after last week’s weak performance. The week just ended saw all key index trackers logging weekly losses – namely the FBM KLCI (-1.8%), FBM 70 Index (-1.2%), FBM Small Cap Index (-2.6%), FBM Fledgling Index (-1.3%) and FBM ACE Index (- 0.4%). By sector, plantation (-3.9%), energy (-3.7%) and healthcare (-3.1%) suffered the heaviest selling flows as only technology (+1.0%) utilities (+0.8%) showed positive weekly returns.
From a technical standpoint, the FBM KLCI remains vulnerable to further downside risk after slipping back to where it was in late March this year. With the Parabolic SAR still signalling a negative bias and the bellwether cutting below the 50-day SMA, a deeper pullback from the intermediate descending trendline is probable. Facing a test of resilience, the FBM KLCI could challenge again our first support threshold of 1,395 (S1), a level that was previously tested in mid-March this year (and coincided with the market bottom). Should S1 give way, the bellwether may slide towards its preceding trough of 1,373 in mid-October last year with our next support line standing at 1,355 (S2). Our immediate resistance barrier remains at 1,440 (R1).
On Wall Street, continuing from where it left off, the DJIA may back off further from our support-turned-resistance hurdle of 33,200 (R1) following a crossover beneath the 50-day SMA. We have set our revised immediate support level at 32,350 (S1).
