The KLCI rose 0.4% in a week to 1,784.76 points on Monday after trading in a narrow trading range between 1,768.64 and 1,788.99 points. Trading volume declined in the past week as market was being cautious. An average daily trading volume in the past week was 1.7 billion shares compared with 1.8 billion shares two weeks ago. Gainers in the composite index in the past week were led by Petronas Chemicals Group Bhd (+3.7%), UMW Holdings Bhd (+3.2%) and YTL Corp Bhd (+2.0%) while decliners were led by RHB Capital Bhd (-1.7%), DiGi.Com Bhd (-1.6%) and PPB Group Bhd (-1%).
Markets in Asia started on a bearish note last week but ended up positive after the rebound late last week. On Monday, Thailand’s SET Index rose 3.2% in a week to 1,459.84 points while the Jakarta Stock Exchange Composite Index increased 3.3% to 4,519.91 points last Friday. The Indonesian exchange was closed on Monday and Tuesday for a public holiday. Singapore’s Straits Times Index added 0.9% to 3,165.25 points. China’s Shanghai Stock Exchange Composite Index rose 1.7% in a week to 2,237.77 points. Hong Kong’s Hang Seng Index increased 1.1% in a week to 23,218.32 points and Japan’s Nikkei 225 index increased 4% to 14,404.74 points last Friday as these markets were closed on Monday for a public holiday.
The US market rebounded sharply last Thursday as talks between the president and the Republicans on raising the US debt ceiling turned out to be positive. The US Dow Jones Industrial Average increased 2.4% in a week to 15,301.26 points after rebounding from a low of 14,802.98 points last Wednesday. Markets in Europe followed the US cue and rebounded last Thursday as well after a bearish week. Germany’s DAX Index added 1.5% in a week to 8,723.81 points and London’s FTSE100 increase 1.1% to 6,507.65 points.
The US dollar rebounded against major currencies on the possibility that the US debt ceiling may be raised and this caused pressure on the price of gold. The US dollar index marginally increased to 80.31 points from 80.03 points a week before. Commodity Exchange gold declined 3.7% in a week to US$1,272.80 an ounce. Crude oil, however, remained firm in the week at US$102.14 per barrel. The ringgit was firm against the US dollar at 3.18. Crude palm oil futures rose 1.9% in a week to RM2,363 per tonne on stronger demand.
The index traded sideways in the past week and maintained above the 30- and 90-day moving averages, indicating good support in the short term despite declines in global markets. Furthermore, the index is also above the Ichimoku Cloud and the cloud is expanding moving forward indicating stronger support. The sideways trend’s immediate resistance level is at 1,780 points while support is at 1,760. A breakout above the immediate resistance level would boost market confidence further and continue its uptrend.
Momentum indicators like MACD and RSI were flat but above the middle levels. This indicates a weak bullish trend. Therefore, the index is likely to be bullish. The Bollinger Bands continued to tighten, indicating a correction. An expansion upward would occur when the KLCI breaks above the top band currently at 1,800 points.
The market is currently at a crucial correction level which can either move further into a downward correction or continue its up-trend. The technical indicators show strong bullish support and the market is ready to rally. Furthermore, the raising of the US debt ceiling would spur further growth in equity markets with continuous monthly stimulus from the world’s largest economy. I am expecting the KLCI to remain bullish as long as it can stay above 1,780 points. A further breakout above 1,800 points would see the index climbing to record highs.
Benny Lee is chief market strategist for Jupiter Securities Sdn Bhd. Jupiter Securities is a participating broker in Bursa Malaysia committed to offering the best services to a wide range of customers. He can be contacted at The views expressed in the article are the opinions of the writer and should not be construed as investment advice. Please exercise your own judgement or seek professional advice for your investment decisions.
This article first appeared in The Edge Financial Daily, on October 16, 2013.
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