FTSE Bursa Malaysia KLCI (.KLSE) falls below critical 1,600 level as global markets roil

FTSE Bursa Malaysia KLCI (.KLSE) falls below critical 1,600 level as global markets roil

FTSE Bursa Malaysia KLCI (.KLSE) falls below critical 1,600 level as global markets roil

The FTSE Bursa Malaysia KLCI (FBM KLCI), Malaysia’s gauge of the 30 largest stocks, closed below the critical 1,600 level yesterday as global markets roiled amid ongoing protests in Hong Kong, fears of a protruded US-China trade war and a crash in Argentina’s stocks and currency.

The FBM KLCI plunged 1.37% or 22.17 points to close at 1,592.88 yesterday, marking its biggest move since falling 1.44% on Oct 23, 2018, as foreign investors took a risk-off mode and existed local bank stocks like Public Bank Bhd.

“Markets were all in the red with global uncertainties on the trade war taking their toll on economies, coupled with recent central banks cutting rates. US bond yields hitting lows also spooked already-fragile markets,”

Weaker earnings for the second quarter (2Q) from Petronas Chemicals Group Bhd did not help the sentiment and drove investors out of other Petroliam Nasional Bhd counters like MISC Bhd, Petronas Dagangan Bhd and Petronas Gas Bhd.

Other decliners include Tenaga Nasional Bhd, Genting Bhd and Genting Malaysia Bhd, which were collectively responsible for close to 14 of the 22 points drop. In Asia, Hong Kong equities took the biggest hit as the region’s airport suspended flights for a second day amid anti-government protests, while Japan’s Topix Index shed its gains for the year.

The Stoxx Europe 600 Index recorded a third straight day of decline, weighed down by industrial and banking stocks. Argentina’s peso and shares crashed after a surprise primary election result which saw President Mauricio Macri losing by a larger margin than expected.

Japan’s Nikkei 225 lost 1.11% and South Korea’s Kospi Index shed 0.85%.

Since the start of the year, the FBM KLCI has declined 5.78%, while the FTSE Bursa Malaysia Small Cap Index is up 14.57% year-to-date (YTD) and the FTSE Bursa Malaysia Mid 70 Index is 8.32% stronger.

“The last time the FBM KLCI closed below 1,600 was in August 2015. We expect the FBM KLCI to rebound above 1,600 soon, as it is an important psychological level,” Rakuten’s Lau said, adding that the market reaction yesterday is only temporary.

Mohd Redza also said the plunge in the FBM KLCI was mainly influenced by declines in finance, industrial products and healthcare-related stocks.

“Sectors like construction, energy and telecommunications are still sitting on YTD gains. Not all is bad despite the FBM KLCI decline…trading volumes have been good since July too. Exporters will likely benefit from the weakness in the ringgit, provided that the demand for their products stays resilient,” he said.

The ringgit fell towards a two-month low yesterday at 4.194 to the US dollar on growing foreign outflows and stress signals in the global economy.

“Chart-wise, the index has been in a bear mode for the past months. The next critical support is at the 1,570 level,” said a chartist at a local brokerage.

The sell-off comes as local equities saw the largest weekly foreign net outflow in 12 weeks last week, with foreign selling jumping to RM1.04 billion net for the week ended Aug 9 from RM601.2 million the week before.

In its weekly fund flow report yesterday, MIDF Research said last week’s “massive net outflow” brought the YTD foreign net outflow from Malaysia to RM6 billion, equivalent to around 51% of last year’s total foreign net outflow.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 1,641.32.

The projected upper bound is: 1,623.22.

The projected lower bound is: 1,575.95.

The projected closing price is: 1,599.59.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 25 white candles and 25 black candles.

A bullish harami occurred (where the current small white body is contained within an unusually large black body). During a downtrend (which appears to be the case with FTSE BURSA KLCI) this pattern implies an end to the decline as the bears appear to have exhausted themselves.

During an uptrend the bullish harami pattern is bearish as the bears appear to be gaining strength as the bulls weaken.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 41.5009. This is not an overbought or oversold reading. The last signal was a buy 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 31.82. This is not a topping or bottoming area. However, the RSI just crossed above 30 from a bottoming formation. This is a bullish sign. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 0 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -98. This is not a topping or bottoming area. The last signal was a buy 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 25 period(s) ago.

Rex Takasugi – TD Profile

FTSE BURSA KLCI closed up 7.430 at 1,600.310. Volume was 7% below average (neutral) and Bollinger Bands were 47% wider than normal.

Open     High      Low     Close     Volume___
1,598.3601,603.0401,596.8201,600.310 110,009,696
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1,615.19 1,654.36 1,666.17
Volatility: 12 9 10
Volume: 163,181,328 119,260,456 124,953,152

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FTSE BURSA KLCI is currently 4.0% below its 200-period moving average and is in an downward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of .KLSE at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on .KLSE and have had this outlook for the last 18 periods.

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