FTSE Bursa Malaysia KLCI (.KLSE) plunges to almost a nine-year low

FTSE Bursa Malaysia KLCI (.KLSE) plunges to almost a nine-year low

FTSE Bursa Malaysia KLCI (.KLSE) plunges to almost a nine-year low

Malaysia saw its net outflow dominated the equity market last week, surpassing a net sell of over RM1.15 billion compared with the previous week’s RM447.9 million due to the unnerving political turmoil which culminated in the scramble among political parties seeking to form the next government.

An analyst said the one-week political instability had caused the net outflow to spike on Monday as the main index, the FBM Bursa Malaysia KLCI (FBM KLCI), declined 2.68 per cent or 41.14 points to 1490.06 points, as well as on Friday, with the index tumbling 1.52 per cent or 22.95 points to 1,482.64. 

“As the index plunged to almost a nine-year low, the oversell scenario is in place. However, the downside risk of the prolonged political crisis combined with COVID-19 concerns would keep the investors at bay for now,” she said. 

Over the week, the country fell into a sinkhole after the ruling Pakatan Harapan collapsed following the resignation of the then Prime Minister Tun Dr Mahathir Mohamad which led to the dissolution of the cabinet.

However, shortly after his resignation, Dr Mahathir was re-appointed as interim Prime Minister by the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah to resolve the stalemate.

On Saturday, in a stunning turn of event, His Majesty appointed Tan Sri Muhyiddin Yasin as the eighth prime minister.

High Highness made his decision in line with article 40(2)(a) and article 43(2)(a) of the Federal Constitution on the basis that Muhyiddin possibly had the support of a majority in parliament, an Istana Negara’s statement said Saturday.

The statement was issued by the Comptroller of the Royal Household Ahmad Fadil Shamsuddin.

Muhyiddin was sworn in as prime minister at Istana Negara at about 10.30am Sunday.

On Thursday, Dr Mahathir, as interim Prime Minister, presented the 2020 Economic Stimulus Package worth RM20 billion to shield the country’s economy from the COVID-19 impact and boost local consumption, while assisting the sectors affected the most such as tourism and services.

Besides the political squabble, the market would also be influenced by the corporate results season, as well as the upcoming FTSE World Government Bond Index (WGBI) review in March, where an exclusion from the WGBI list would cost the local bourse its international market accessibility. 

On the ringgit performance, the political realignment had caused the local currency to decline to 4.2120/2180 on Friday compared with 4.1900/1940 previously, while the FBM KLCI dropped 48.56 points to 1,482.64.

According to an analyst, the ringgit is expected to remain on the downside due to lack of positive catalysts, the political scene, as well as the prevailing COVID-19. 

Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the risk aversion had been prevalent since the COVID-19 outbreak outside China spread at a rapid pace alongside the domestic political uncertainty.

“We could see the bond yields had fallen with the 3-,5- and 10-year Malaysian Government Securities (MGS) yields dropping by 8.0, 10.0 and 8.0 basis points on week-on-week basis to close at 2.62 per cent, 2.67 per cent and 2.83 per cent, respectively, on Friday.

“Given the current COVID-19 situation, all eyes will be focusing on the February’s PMI indices to gauge its immediate impact to the economy,” he said.

As for next week, Afzanizam said investors would await the next Bank Negara Malaysia’s decision on its overnight policy rate (OPR) on March 3.

“We see a high chance that BNM would reduce the OPR by 25 basis points to 2.50 per cent to complement the fiscal stimulus measures announced on Feb 27,” he said. 

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 1,552.75.

The projected upper bound is: 1,516.29.

The projected lower bound is: 1,445.22.

The projected closing price is: 1,480.75.

Candlesticks

A black body occurred (because prices closed lower 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 23 white candles and 27 black candles for a net of 4 black candles.

A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 4 falling windows in the last 50 candles–this makes the current falling window even more bearish.

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 31.6127. This is not an overbought or oversold reading. The last signal was a buy 3 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 29.82. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 1 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 -130.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 1 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 4 period(s) ago.

Rex Takasugi – TD Profile

FTSE BURSA KLCI closed down -22.950 at 1,482.640. Volume was 178% above average (trending) and Bollinger Bands were 38% wider than normal.

Open     High      Low     Close     Volume___
1,484.9001,494.0901,473.7701,482.640 312,195,008
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 1,514.89 1,564.54 1,599.46
Volatility: 19 15 11
Volume: 158,522,656 122,658,464 113,692,184

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 gapped down today (bearish) on heavy volume. Possibility of a Breakaway Gap which usually signifies the beginning of a major market move. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
FTSE BURSA KLCI is currently 7.3% 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 24 periods. Our momentum oscillator is currently indicating that .KLSE is currently in an oversold condition. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.

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