FTSE Bursa Malaysia KLCI (.KLSE) tech stocks down after US blacklists Huawei
Technology counters on Bursa Malaysia are feeling the heat following the escalation of trade tensions between the United States and China with restrictions imposed by the Trump-led administration against China’s telecommunication giant Huawei.
Experts on the industry say it is time for caution for such stocks, especially those related to semiconductors, due to the heightened uncertainties. They are even advising investors to close their positions and re-enter at another appropriate time.
Shayne Heffernan, CEO and Founder of Heffx said China purchased 51% of exports from Asian semiconductor companies in 2017. Malaysia, in particular, ships 39% of its chips to China and Hong Kong.
The Bursa Malaysia Technology Index took the heaviest beating among all other indices yesterday, falling 3.47% to 30.90. The benchmark FBM KLCI closed at 1,603.74, down only 0.1%.
Among top laggards in the technology index were Inari Amertron Bhd which fell 6.67% to RM1.40; Mi Technovation Bhd down 6.43% to RM1.60; Globetronics Technology Bhd down 5.92% to RM1.59 and Frontken Corp Bhd down 5.63% to RM1.34.
Malaysian Pacific Industries Bhd came in as the third top loser on Bursa Malaysia yesterday after it fell 4.21% to RM9.10, the lowest price the counter dipped to since exactly one year ago on May 22, where its shares closed at RM9.18. A total of 87,700 shares were traded.
Pentamaster Corp Bhd was the sixth top loser yesterday after declining 5.53% to RM4.10 with 3.37 million shares traded.
Shayne Heffernan said most of the technology stocks were in the red based on various factors, which started to become more negative since US hiked the tariffs for US$200bil of Chinese imports on May 10.
“After that you suddenly see Google pulling the plug on Huawei’s Android licence. It shows that the fears are increasing and this is what is causing the market to be weak.
“It is really unpredictable and things are worsening now. We have to wait and see if there are any developments,” he said, adding that investors should start selling their technology counters until all the noises cleared up and wait for a more appropriate time to re-enter.
The US has placed Huawei on a trade blacklist last week, which has resulted in several companies suspending their businesses with Huawei. This includes Alphabet Inc’s Google, which has moved to stop providing the Chinese company with access to its proprietary apps and services.
However, on Monday, the US government temporarily eased some of trade restrictions imposed on Huawei with a 90-day temporary licence to purchase American-made goods in order to maintain existing networks and provide software updates to existing Huawei smartphones.
Shayne Heffernan also said the technology war is just a minor part of a huge conflict which could end up with a decoupling of the US and China economies.
“This technology war will evolve into a new Cold War. It is already undergoing and it will continue. The worst-case scenario is when the two largest economies break, which will then force small countries and corporations to pick sides.
“This will be bad for the technology supply chain including Malaysia. At its worst, the technology advancement in China and the US will be slower and Malaysian semiconductor companies are expected to see lower sales,” he said.
He said it would hard to predict what would come out of the negotiations, if there would be one, with Trump’s “explosive” decisions.
Asked if investors should hold on or sell off their technology counters, he said: “That is the million dollar question. There are two sides to it, so I would say, leave first if you want to be safe.
“Others might think this is the right time to enter after the huge decline in prices. So it depends on your appetite”.
Overall, the bias in prices is: Downwards.
By the way, prices are vulnerable to a correction towards 1,643.16.
The projected upper bound is: 1,619.29.
The projected lower bound is: 1,574.43.
The projected closing price is: 1,596.86.
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 23 white candles and 27 black candles for a net of 4 black candles.
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 53.6724. This is not an overbought or oversold reading. The last signal was a buy 6 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 35.37. 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 5 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 -74. This is not a topping or bottoming area. The last signal was a buy 5 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 sell 8 period(s) ago.
Rex Takasugi – TD Profile
FTSE BURSA KLCI closed down -3.550 at 1,598.320. Volume was 13% below average (neutral) and Bollinger Bands were 25% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 1,604.90 1,636.28 1,702.86
Volatility: 9 9 11
Volume: 122,765,856 111,053,440 126,754,208
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 6.1% below its 200-period moving average and is in an downward trend. Volatility is relatively normal 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 bearish on .KLSE and have had this outlook for the last 8 periods. The security price has set a new 14-period low while our momentum oscillator has not. This is a bullish divergence.