FTSE Bursa Malaysia KLCI (.KLSE) Rebounding
After months of scrimping on public spending, the Pakatan Harapan (PH) government is showing signs of easing its purse strings and reviving large state projects as investors return to Malaysia.
Bloomberg reported today that foreign investors have been coming back, adding that the turnaround would be a boost to Prime Minister Tun Dr Mahathir Mohamad’s government, which saw over US$3 billion (RM12.4 billion) of foreign funds flow out of the market since last year.
This is despite criticism from Opposition parties, including former prime minister Datuk Seri Najib Razak who was also the previous finance minister, that the new PH government’s policies and domestic politics scared off foreign investors.
According to Bloomberg, the Malaysian stock market, which it had described as “the world’s worst major stock market” earlier this year, is on the rise again having drawn some US$84 million from foreign investors last week, the most since late January.
It reported that the FTSE Bursa Malaysia KLCI Index has also clawed back about half of this year’s loss of more than 5 per cent, which was what earned Malaysia the unwanted title as the world’s worst stock market.
Business analyst Areca Capital Sdn Bhd called for buys on Malaysian company shares, saying earnings will not be dropping from here on.
Its chief executive officer Danny Wong told Bloomberg that it started to buy stocks from Malaysian glove makers and consumer and digital services about two weeks ago.
“There is a bottom in earnings downgrades if you look at results, too-low expectations and low base,” he was quoted saying.
Surprise earnings and hopes of more interest rate cuts at government-linked companies like Telekom Malaysia Bhd and Tenaga Nasional Bhd have also aided investor sentiment, according to Bloomberg.
“Reforms at state-linked companies, more political clarity and stimulus could see the benchmark gauge surge to 1,800 in the base scenario, or even reach 1,900 in the bullish case, Macquarie Group Ltd.’s analysts wrote in a note on April 26. The gauge retreated 0.1 per cent to 1,654.03 as of the midday break in Kuala Lumpur,” the international business wire agency said in the report.
It noted that investors see Malaysian equities safe for trading amid the ongoing US-China trade war.
Among the biggest gainers in the market rebound have been the nation’s builders, with the Bursa Malaysia Construction Index surging 35 per cent so far this year.
“We see further revivals of large-scale infrastructure projects as catalysts that may provide further upside for construction stocks,” RHB Investment Bank Bhd analyst Tay Yow Ken was quoted saying.
However, not all analysts are optimistic. Samsung Asset Management Co regional fund manager Alan Richardson was quoted saying that the government lacked fiscal flexibility amid the external challenges.
The stock gauge has rebounded 3.5 per cent since dropping to a low not seen since 2015 on May 24.
The index is valued at 16.2 times projected 12-month earnings, down from this year’s peak of 16.5 in March, according to Bloomberg data.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 1,673.67.
The projected lower bound is: 1,628.78.
The projected closing price is: 1,651.23.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 24 white candles and 26 black candles for a net of 2 black candles.
An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with FTSE BURSA KLCI). It then signifies that the momentum may be shifting from the bulls to the bears.
If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.
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.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 80.0106. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 1 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 60.71. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 15 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 83. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 8 period(s) ago.
Rex Takasugi – TD Profile
FTSE BURSA KLCI closed down -4.270 at 1,651.200. Volume was 3% below average (neutral) and Bollinger Bands were 54% wider than normal.
Open High Low Close Volume___
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1,638.22 1,629.41 1,695.52
Volatility: 9 9 11
Volume: 137,697,856 115,722,096 127,543,024
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.
FTSE BURSA KLCI is currently 2.6% below its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .KLSE at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .KLSE and have had this outlook for the last 5 periods.