Saturday September 15, 2012
Stocks poised to firm on good news
By K.M. LEE
REVIEW: On the back of the positive settings from the United States, shares on Bursa Malaysia kicked off the week steadier, with the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) rising 0.44 point to 1,624.99, amid continuous bargain-hunting interest.
Trading was pretty encouraging in early deals and soon the key index hit a high of 1,629.19.
However, the recovery could not be sustained later, as a mixed showing in the Asia-Pacific region on concerns over growth in China and the United States dampened enthusiasm and prompted investors to book profit.
Consequently, the local bourse drifted sideways to lower from mid-morning to finish down 3.51 points to 1,621.04 on Monday.
After some significant moves, overnight Wall Street ended the winning streak the next day, taking a breather from the recent rally as investors turned cautious ahead of a German constitutional court ruling on Wednesday and the outcome from the Federal Reserve meeting on Thursday.
Though crude oil prices added 12 cents to US$96.54 a barrel, it was not helping and with most regional bourses reversing down, Bursa came under tremendous stress to retreat.
In the absence of fresh market-stimulating leads, blue chips suffered a beating, resulting in the key index violating the relatively important 100-day simple moving average (SMA) of 1,605 in the morning session.
But just when the market looked defenceless and in great danger of slipping below the 1,600-point psychological level, some bargain-hunting activity came to the rescue and that helped lift the bulls off the bottom.
At the close, the local bourse lost only a marginal 6.80 points to 1,614.24 on Tuesday.
In another sluggish pattern, Bursa drifted between an intra-day high and low of 1,616.47 and 1,609.01 respectively before ending 0.46 point lower at 1,613.78 amid extended consolidation in mid-week.
Nevertheless, the local market sprang back to life in the wake of renewed buying interest on Thursday, boosted by the rolling out of an additional seven project investments totalling RM5.607bil under the Economic Transformation Programme (ETP), which were announced by Prime Minister Datuk Seri Najib Tun Razak.
A favourable German court ruling affirming the legality of the eurozone's 700 billion euro European Stability Mechanism bailout fund also aided the local sentiment.
As usual, blue chips led the charge, driving the key index up a steep 14.62 points to 1,628.40.
Thereafter, bargain hunting continued to dominate the floor, spurred by a sharply higher global equities on news that the US central bank had initiated another aggressive plan to stimulate the world's largest economy.
In a robust business, the FBM KLCI chalked up 14.55 points to 1,642.95 yesterday.
Statistics: On a weekly basis, the principal index added 18.40 points, or 1.1%, to 1,642.95 yesterday, compared with 1,624.55 on Sept 7.
Total turnover for the week stood at 4.733 billion shares worth RM8.532bil versus 6.630 billion units valued at RM8.520bil the prior week.
Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index were rising after flashing a short-term buy at the oversold territory on Tuesday.
Likewise, the 14-day relative strength index improved sharply from a reading of 23 in mid-week to settle at the 56 points level.
Elsewhere, the daily moving average convergence/divergence (MACD) histogram traced out a strong convergence pictogram despite keeping the sell signal.
Unlike the daily peers, weekly indicators were negative, with the weekly slow-stochastic momentum index sliding and the weekly MACD issuing a sell call.
Outlook: Bursa avoided a major breakdown, with the FBM KLCI rebounding significantly on fresh buying, up from the critical 1,601.31 points on Tuesday to achieve a high of 1,642.95 yesterday.
It was the first weekly gain in four weeks for the key index, thus offering a ray of hope that the recent correction phase has come to an end.
Going forward, the local bourse is poised to firm, riding on a slew of good news such as the favourable German court ruling on the legality of the eurozone's bailout fund and the Federal Reserve initiating another dose of stimulus package, as well as Beijing looking to stimulate her economy and the ETP at home. The upcoming budget also is expected to offer a helping hand.
Technically, indicators are mixed, suggesting there is still a possibility of Bursa being trapped within a modest band.
Important support is pegged at the 1,600-point psychological level. A slip below this line would result the lower 200-day SMA, resting at 1,573, becoming much weaker.
Heavy resistance is expected at the historical peak of 1,655.49, established on Sept 3, of which a break above would open the windows for the bulls to explore the unknown areas.