BLUE chips on Bursa Malaysia surged for a third straight week, boosted by a bullish breakout in the US Dow Jones Industrial Average to a new high, which spilled over to lift Asian markets to record levels, and shored up the benchmark Kuala Lumpur Composite Index (KLCI) as well. For the week, the KLCI rose 36.09 points, or 2.7 per cent, to close at 1,372.39, with average daily trading volume ballooning to 1.55 billion shares from 1.1 billion shares in the previous week.
The index gain last week was driven mainly by Bumiputra-Commerce, Maybank, MAS, Tenaga, Astro, Genting and the three plantation heavyweights, Golden Hope Plantations, Guthrie and Sime Darby which are involved in the Synergy Drive deal.
The release of US employment data for September brought cheers to the US market last Friday as the S&P 500 index hit an all-time high. Employment accelerated to 110,000 in the month after an increase of 89,000 in August, which was revised upward from -4,000 previously. The slightly better than expected September payroll numbers eased worries of a recession in the US. The employment numbers strengthen my view two weeks ago that contrary to market expectations, the Fed will maintain its key hurdle rate at 4.75 per cent until December.
The KLCI is expected to react positively to the US markets' performance last Friday when it reopens today and it could even see new highs this week if the buying momentum is sustainable. The strong volume of 2.1 billion shares last week after a long gestation period of nine weeks indicates the return of interest in the market but the momentum could wane out as we approach the tail end of the week ahead of the Hari Raya holidays.
The higher US employment numbers may also have a positive impact on the local market as the subsequent growth in consumption spending could lead to better demand for our exports which grew at a paltry rate of 0.3 per cent in the month of August. The main culprit for the subdued performance was the lower demand for computers and parts, particularly from the US, and falling global prices of semiconductors, which led to a fall in the export earnings of electronic products by 4.8 per cent year-on-year.
Also expect the second and lower liners to catch up with the bigger boys this week due to the apparent widening in price-to-earnings gap. We witnessed the interest in blue chips in the last three weeks that was not mirrored on the broader market. The return of foreign interest, judging from the ringgit strengthening and the RM4.1 billion increase in end-September foreign reserves, and selective nibbling of local funds could have contributed to that.
Investors are advised to go long on the market and view any weakening in price as an opportunity to buy-on-dip for a year-end rally. Based on the KLCI's month-on-month gain in the last 30 years, three best months for the index were October, January and February, with the latter being the best period. There is still ample liquidity in the system to drive a rally in the next two quarters as the excess liquidity mopped up by Bank Negara Malaysia remains substantial at RM224.8 billion as of end-September.
Technical outlook
The KLCI began trading last week on a bullish note, rising from the opening low of 1,337.65 to close with a double-digit gain on Monday, shored up by renewed buying interest in blue chips. A gap-up registered the next day, fuelled by resurgent buying momentum due to spillover bullish sentiment from an overnight rally on the US Dow Jones average to a new all-time high. The blue-chip index surged to close more than 20 points up at just below the 1,370 immediate chart resistance on Tuesday.
A further rally mid-week was checked at the intra-week high of 1,380.29 in late morning trade on Wednesday, which was the highest level seen since July 26, before profit-taking dragged down the benchmark for a negative close. Follow-through profit-taking and selling softened the index to slightly cover the 1,353 to 1,359 gap-up on the next day, before buyers returned to lift it significantly off lows. The market then staged a profit-taking consolidation Friday as traders squared off most positions ahead of the weekend.
Lower liners rose in concert, with buying interest still focused on the construction, plantation, property and oil & gas sectors. The Second Board Index added 1.6 points, or 1.5 per cent, week-on-week to close at 107.39, while the Mesdaq Composite Index advanced 1.89 points, or 1.5 per cent to end at 124.81 last Friday.
On the technical indicators, the daily slow stochastics indicator for KLCI has eased lower from an extreme overbought reading, but the weekly indicator extended higher to sustain the bullish medium-term reading. The 14-day Relative Strength Index (RSI) is now in the overbought zone with a reading above 70 last Friday, while the 14-week RSI has a reading just above 60. The daily Moving Average Convergence Divergence (MACD) trend indicator continued its upward expansion, while the weekly MACD trigger line hooked up further, closing in for an impending buy signal on further strength.
Conclusion
As expected, the KLCI extended its rally towards the rising 38.2 per cent Fibonacci Fan Line (FFL) from the March 5 low, helped by breakout rallies on the US Dow Jones average and more Asian stock markets hitting record highs. The much stronger buying momentum, which peaked last Friday with trading volume crossing above the two billion shares mark, was the catalyst that sustained bullish momentum last week.
For this week, strong buying momentum should follow-through to re-challenge the revised higher immediate resistance of 1,380 (IR), which was last week's high, before meeting more formidable resistance from the 1,392 (R1) record high on July 24. The strong US jobs data last Friday should fuel further upside momentum on Asian markets and hence spill over to eventually trigger a breakout rally on the local market. On the flip side, immediate support is adjusted higher to 1,350 (IS), with stronger up-trend support coming from the 38.2 per cent FFL, which is rising towards 1,350 by month-end.
The index gain last week was driven mainly by Bumiputra-Commerce, Maybank, MAS, Tenaga, Astro, Genting and the three plantation heavyweights, Golden Hope Plantations, Guthrie and Sime Darby which are involved in the Synergy Drive deal.
The release of US employment data for September brought cheers to the US market last Friday as the S&P 500 index hit an all-time high. Employment accelerated to 110,000 in the month after an increase of 89,000 in August, which was revised upward from -4,000 previously. The slightly better than expected September payroll numbers eased worries of a recession in the US. The employment numbers strengthen my view two weeks ago that contrary to market expectations, the Fed will maintain its key hurdle rate at 4.75 per cent until December.
The KLCI is expected to react positively to the US markets' performance last Friday when it reopens today and it could even see new highs this week if the buying momentum is sustainable. The strong volume of 2.1 billion shares last week after a long gestation period of nine weeks indicates the return of interest in the market but the momentum could wane out as we approach the tail end of the week ahead of the Hari Raya holidays.
The higher US employment numbers may also have a positive impact on the local market as the subsequent growth in consumption spending could lead to better demand for our exports which grew at a paltry rate of 0.3 per cent in the month of August. The main culprit for the subdued performance was the lower demand for computers and parts, particularly from the US, and falling global prices of semiconductors, which led to a fall in the export earnings of electronic products by 4.8 per cent year-on-year.
Also expect the second and lower liners to catch up with the bigger boys this week due to the apparent widening in price-to-earnings gap. We witnessed the interest in blue chips in the last three weeks that was not mirrored on the broader market. The return of foreign interest, judging from the ringgit strengthening and the RM4.1 billion increase in end-September foreign reserves, and selective nibbling of local funds could have contributed to that.
Investors are advised to go long on the market and view any weakening in price as an opportunity to buy-on-dip for a year-end rally. Based on the KLCI's month-on-month gain in the last 30 years, three best months for the index were October, January and February, with the latter being the best period. There is still ample liquidity in the system to drive a rally in the next two quarters as the excess liquidity mopped up by Bank Negara Malaysia remains substantial at RM224.8 billion as of end-September.
Technical outlook
The KLCI began trading last week on a bullish note, rising from the opening low of 1,337.65 to close with a double-digit gain on Monday, shored up by renewed buying interest in blue chips. A gap-up registered the next day, fuelled by resurgent buying momentum due to spillover bullish sentiment from an overnight rally on the US Dow Jones average to a new all-time high. The blue-chip index surged to close more than 20 points up at just below the 1,370 immediate chart resistance on Tuesday.
A further rally mid-week was checked at the intra-week high of 1,380.29 in late morning trade on Wednesday, which was the highest level seen since July 26, before profit-taking dragged down the benchmark for a negative close. Follow-through profit-taking and selling softened the index to slightly cover the 1,353 to 1,359 gap-up on the next day, before buyers returned to lift it significantly off lows. The market then staged a profit-taking consolidation Friday as traders squared off most positions ahead of the weekend.
Lower liners rose in concert, with buying interest still focused on the construction, plantation, property and oil & gas sectors. The Second Board Index added 1.6 points, or 1.5 per cent, week-on-week to close at 107.39, while the Mesdaq Composite Index advanced 1.89 points, or 1.5 per cent to end at 124.81 last Friday.
On the technical indicators, the daily slow stochastics indicator for KLCI has eased lower from an extreme overbought reading, but the weekly indicator extended higher to sustain the bullish medium-term reading. The 14-day Relative Strength Index (RSI) is now in the overbought zone with a reading above 70 last Friday, while the 14-week RSI has a reading just above 60. The daily Moving Average Convergence Divergence (MACD) trend indicator continued its upward expansion, while the weekly MACD trigger line hooked up further, closing in for an impending buy signal on further strength.
Conclusion
As expected, the KLCI extended its rally towards the rising 38.2 per cent Fibonacci Fan Line (FFL) from the March 5 low, helped by breakout rallies on the US Dow Jones average and more Asian stock markets hitting record highs. The much stronger buying momentum, which peaked last Friday with trading volume crossing above the two billion shares mark, was the catalyst that sustained bullish momentum last week.
For this week, strong buying momentum should follow-through to re-challenge the revised higher immediate resistance of 1,380 (IR), which was last week's high, before meeting more formidable resistance from the 1,392 (R1) record high on July 24. The strong US jobs data last Friday should fuel further upside momentum on Asian markets and hence spill over to eventually trigger a breakout rally on the local market. On the flip side, immediate support is adjusted higher to 1,350 (IS), with stronger up-trend support coming from the 38.2 per cent FFL, which is rising towards 1,350 by month-end.
source : Business Times
1 comment:
Dear SamRam
Need yr help
How do get the month end KLCI figures for 2007-2008
When I google Bursa Malaysia - m unable to get the KLCI instead get a counter by the same initials
PLEASE HELP
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