Dec 19, 2009

FBM KLCI may end 2009 on high note

fbm-klci Share prices on Bursa Malaysia started out the week little changed, with the benchmark FBM Kuala Lumpur Composite Index (FBM KLCI) easing 0.04 of a point at 1,259.96 despite a steadier Wall Street overnight.

Business was thin, as the directionless Asian equities prompted local investors to stay on the sidelines while others were already away on vacation.

Nevertheless, the market got a lift later in the afternoon after Dubai said it had received US$10bil from fellow UAE member Abu Dhabi to help it repay a US$4.1bil Islamic bond and the excess would be used to cater to Dubai World’s needs until the end of April next year but buying momentum appeared concentrated, gathering around the blue chips. Elsewhere, second and third liners remained flat to marginally lower.

In fact, it was clearly reflected on the scoreboard. Though the key index managed to reverse early weakness in late trade to settle at the day’s high of 1,265.45, up 5.45 points, there were more losers than winners on Monday.

Overnight Wall Street extended the upward thrust the next day, propelling the Dow to a 14-month high amid easing concerns about Dubai’s debt default and optimism of more merger and acquisition activity following a takeover deal by Exxon Mobil Corp.

Surprisingly, the overall sentiment in the Asia-Pacific region was muted, with major indices such as the Nikkei 225-share Index, the Shanghai Composite Index and the Hang Seng Index dropping between 0.22% to 1.23% on worries the US$10bil bailout may not be enough and fears that the Dubai debt woes may spread and rattle global financial markets later.

Tracking the poor performance in regional peers, Bursa Malaysia continued to drift sideways-to-lower in slow business until the very last minute, where a late round of “window-dressing” action in selected big-cap counters helped send the FBM KLCI up 5.36 points to 1,270.81 at the closing bell.

In spite of the firmer close, the overall market breadth was again negative, with 280 advancers against 308 decliners on Tuesday.

Thereafter, Bursa Malaysia extended the range-bound pattern in the absence of fresh market-stimulating leads on the horizon, with sentiment undermined by the lower overnight Wall Street. The mixed showing in regional bourses was another discouraging factor.

In sluggish sessions, the key index retreated 1.78 points to 1,269.03 in mid-week and an extra 2.06 points to end the week at 1,266.97 on Thursday. The local bourse was shut for a public holiday on Friday.

Statistics: On a Friday to Thursday holiday-shortened week, the bellwether FBM KLCI climbed 6.97 points, or 0.6% to 1,266.97 on Thursday, versus 1,260.00 on Nov 11. Weekly turnover stood at 2.388 billion shares worth RM3.456bil, compared with 3.035 billion units valued at RM3.94bil previously.

Technical indicators: The oscillator per cent K and the oscillator per cent D of the daily slow-stochastic momentum index, which triggered a short-term buy at the bottom on Dec 11, were fast entering into the overbought territory.

Although the daily moving average convergence/divergence (MACD) histogram remained in sell mode, it had indicated a strong convergence signal. Also on the rise, the 14-day relative strength index improved slightly from the neutral zone to the 60-point level yesterday.

In stark contrast, weekly indicators were negative, with the weekly slow-stochastic momentum index on the slide and the weekly MACD expanding downward against the weekly trigger line after flashing a sell on Nov 22.

Outlook: Bursa Malaysia was generally in consolidation mode the past week, but with a mild upward bias, thanks to light nibbling of selected core index-linked counters by institutional players.

There are only eight trading days left before we say goodbye to 2009 and from what we can see, there are already signs of the traditional “window-dressing” activity at work, although limited for now. But with the Federal Reserve voicing optimism about a stabilising US economy, investors may have gained more confidence to take greater risk going forward. Hence, the FBM KLCI may end this year on a high note, probably near the 1,300-point psychological level.

Technically, indicators are painting a mixed landscape. Unless volumes expand positively, there is still a chance of Bursa Malaysia being trapped within a box on extended consolidation over the next couple of weeks.

To the upside, initial resistance can be expected at 1,280 points, followed by the 1,300-1,305 point band. The next upper barrier is seen at 1,332 points. Important support line is pegged at the 50-day simple moving average of 1,260.89 points, of which a clear breakdown may trigger a fresh bout of selling pressure. Then, the lower floor of 1,250 points, 1,230-1,233 point band will be much weaker.