The Malaysia stock market on Thursday snapped the two-day winning streak in which it had added more than 6 points or 0.4 percent. The Kuala Lumpur Composite Index now sits just beneath the 1,450-point plateau and it may be stuck in neutral again on Friday.
At 9.19am, the FBM KLCI opened at 1444.71.
RHB Research, in a note today (Aug 18), said the FKLI experienced sharp profit-taking yesterday, settling 16.50 pts lower at 1,447.50 pts – breaching beneath the 1,450 pts support.
The index futures opened at 1,463 pts and dropped sharply, hitting the 1,440 pts session low before rebounding moderately at the close.
The strong bearish momentum breached the stop-loss point – shifting the short-term momentum negatively towards the 200-day SMA line and possibly reaching the 1,430 pts support.
This negativity is supported by the RSI’s sharp drop, nearing 50% from 64% previously. A break below 1,430 pts could signal an extended medium-term bearishness below the 200-day SMA line.
Considering RHB’s earlier caution and the breaching of the trailing-stop level, they adopt a negative trading bias.
RHB closed out their long positions, initiated at 1,389 pts or the closing level of 16 Jun, after the trailing-stop at 1,450 pts was triggered.
Conversely, RHB initiates short positions at 1,447.50 pts, ie 17 Aug’s close. To manage trading risks, the initial stop-loss is placed at the 1,468.50-pt level.
The immediate support is now set at 1,430 pts, followed by 1,400 pts threshold. Conversely, the immediate resistance stays at 1,468.50 pts – 1 Aug’s high – and is followed by 1,500 pts.
Malacca Securities (MSSB) said the FBMKLCI (-1.1%) retreated as selling pressure were evident in more than two-thirds of the key index components yesterday. The lower liners also turned downbeat, while the energy sector (-1.9%) underperformed the mostly negative sectorial peers following the weaker crude oil prices.
Volatility took precedence with the key index wiping out all the previous 2 sessions of gains yesterday. Sentiment was roiled by the weakness on Wall Street overnight, while foreign funds have turned net selling for the first time in 9 trading sessions.
The lower liners were not spared as profit taking activities emerged following the recent winning run. Looking ahead, investors will be keeping an eye on the key economic data; Malaysia’s 2Q23 GDP data set to be released today. MSSB believes the market may cheer should the reported number that came above the Bloomberg consensus expectations of 3.6% YoY growth.
Commodities wise, the Brent crude oil supported above USD83/bbl, while the CPO prices hovered above RM3,800/MT.
Sector focus: MSSB expects the property sector may extend its positive movement with most of the property players turning more optimistic in 1H24 as guided by the Housing Developers’ Association Malaysia (REHDA). The strong vehicles announced data may boost the automotive-related stocks. Meanwhile, the energy sector may advance in line with higher crude oil prices.
The FBMKLCI ended lower and formed a bearish candle and the key index slipped below the daily EMA9 level yesterday. Technical indicators turned mixed as the MACD Histogram formed a negative bar, while the RSI is treading above 50.
The next resistances are located along 1,480-1,500, while the support is pegged around 1,420-1,440 the local benchmark.
CGSCIMB said the FBMKLCI (KLCI) tracked the regional weakness. The benchmark was among the worst performing indices in the region, falling 15.53pts or 1.06% to end the day at 1,447.98.
Most sectors ended in the negative territory except for property (+1.52%), REIT (+0.36%), construction (+0.19%) and healthcare (+0.15%). The top laggards were energy (-1.85%), plantation (-1.61%) and technology (- 1.10%).
Trading volume increased to 4.34bn (up from 3.62bn on Wednesday) while trading value continued to rise to RM2.56bn (up from RM2.21bn previously). Market breadth turned negative as 355 dragged down by 607 decliners.
The KLCI pulled back from its 6-month high yesterday amid profit-taking activities. Yesterday’s long black candle together with a sharp pick up in volume suggests that short-term weakness may have kicked in. The possible formation of a double top, coming off the double overhead resistance, is a tad worrying as well.
The breakdown of last Friday’s low (1,449) likely signals that a retest of the 1,430-1,438 support band (which includes the 200-day EMA) is next. The 50- day EMA (currently at 1,427) is the next likely destination if the said support band cannot hold up.
On the upside, prices would need to overcome 1,465 before any attempts to push higher towards 1,476-1,480 can take place. CGSCIMB’s portfolio stays in risk-on mode this week. However, the portfolio would revert to risk-off modenext week if the index closes below 1,431 today.
