Bursa Malaysia has been down in two of the last three trading days after a three-day winning streak that saw it gain nearly 25 points, or 1.7 percent.
The Kuala Lumpur Composite Index is now just below 1,620 points, but it’s expected to rebound on Monday.
At 9.16am, the FBMKLCI rose +0.34 points to open at 1,620.67.
RHB Retail Research (RHB) in a statement today said (May 27) that the FTSE Bursa Malaysia KLCI (FKLI) experienced strong profit-taking on Friday, dropping 11.50 points to close at 1,618 points.
On Friday, the index started at 1,630.50 points. It reached an intraday high of 1,631.50 points before reversing to a low of 1,616.50 points and ending the day at 1,618 points, forming a Bearish Engulfing pattern.
This recent drop suggests that the index might go through a correction and could fall towards the 1,600-point support level. The Relative Strength Index (RSI) is also showing a downward trend, indicating slowing momentum.
However, in a bullish market, support levels tend to hold strong. RHB expects the index to bounce back from the 1,600-point level. As long as it stays above this psychological mark, RHB remains optimistic.
They advise traders to keep their long positions initiated at 1,455 points from November 3, 2023. To manage risks, they suggest setting a trailing-stop at 1,600 points.
The immediate support levels are at 1,600 and 1,575 points. On the upside, resistance levels are at 1,650 and 1,700 points.
Malacca Securities (MSSB) reported that the FBMKLCI fell by 0.60% due to profit-taking in YTL-related stocks, even though they reported strong earnings. This suggests that the results may have disappointed some investors.
On a positive note, the Technology sector rose by 0.50% thanks to stronger earnings from certain key companies.
The Day Ahead
The Malaysian stock market has seen a healthy pullback after several weeks of strong buying. However, Malacca Securities (MSSB) expects bargain hunting to pick up this week as many companies will be releasing their earnings reports.
In the U.S., better-than-expected consumer sentiment and durable goods orders have kept buying interest strong on Wall Street. The Nasdaq is heading towards a new all-time high, driven by optimism in the Technology sector.
In the commodities market, Brent oil has bounced back from around USD 81 per barrel ahead of the OPEC+ meeting on June 1st. Meanwhile, gold prices are steady, and crude palm oil (CPO) prices remained within the RM 3,855-3,925 range last week.
Sectors to Watch
Technology: With strong sentiment in the Technology sector on Wall Street and positive news about data center and multinational company (MNC) investments in Malaysia, buying interest in the local Technology sector is expected to continue.
Property: Property stocks may see further positive ratings due to increased foreign direct investments.
Construction, Building Materials, and Solar: These sectors remain attractive due to optimism around the Kuala Lumpur-Singapore High-Speed Rail (KL-SG HSR) project and the ongoing execution of the National Energy Transition Roadmap (NETR) and National Industrial Master Plan (NIMP).
Bloomberg FBMKLCI Technical Outlook
The FBMKLCI index has dropped below the 1,620 level. The technical indicators show a mixed outlook: the MACD Histogram is slightly less positive, and the RSI is still overbought.
The resistance levels are expected around 1,635-1,640 points, while support levels are between 1,600-1,605 points.
CGS International (CGS) said Asian stock markets ended the week on a lower note, marking the first decline in five weeks as technology shares retreated.
CGS stated that the local benchmark FBMKLCI (KLCI) dropped 0.60% to close at 1,619.40 for the week, despite gaining 0.2% week-on-week. Most sectors experienced profit-taking, except for technology, construction, and plantation sectors, which saw modest gains. Healthcare, utilities, and transportation sectors were among the laggards for the week. Trading volume and value decreased compared to the previous session, with market breadth turning negative as decliners outnumbered gainers.
Additionally, they said on Friday, the KLCI eased slightly after reaching a new 3-year high earlier in the day following the Wesak Day break. However, it failed to close above the critical resistance level of 1,620-1,625. The index closed marginally below the support trend line drawn from the mid-April low, signaling a potential consolidation phase. Further retests of the 1,620-1,625 levels are expected if the support at 1,610 holds. The next resistance levels are at 1,657-1,660, with minor resistance seen at 1,642-1,646.
Despite the market conditions, CGS portfolio remains in risk-on mode for the week.
