The ascending channel pattern on the chart remains intact for the moment. This, in turn, raises the support
points and resistance bars along the way, suggesting that our Malaysian bourse could still plot a series of
higher highs and higher lows going forward.
After a short and shallow intermittent pullback, the bellwether FTSE Bursa Malaysia KLCI (FBM KLCI)
resumed its uptrend with a weekly increase of 27.6-point or 2.3% to settle at 1,233.82 last Friday. Also up
for the week were the FBM 70 Index (+2.0%) and the FBM ACE Index (+0.7%). An added positive was the
notable pick-up in trading activity, as daily average volume and value soared to 717.9m shares and RM1.2b
respectively, heavier than the 584.5m units worth RM844.9m traded the week before.
Even the external backdrop is changing to a bit more optimistic now. Last week, Asian equities mostly
rebounded from their preceding weeks’ losses, paced by China shares listed in Hong Kong (+8.4%), Hong
Kong (+5.5%) and Thailand (+3.1%). In the U.S., major stock barometers were up between 4.0% and 4.5%
through the week. Interestingly, the widely watched Dow Jones Industrial Average is presently standing at
9,865 (its highest close since the rally started in Mar this year), eyeing to surpass 10,000 (the psychological
barrier) soon.
In essence, the bits and pieces of positive data – on economic recovery progress and corporate profit
expectations – held together to stir up buying interest globally. Whether the incoming reports remain
pleasant or turn nasty would be the key in sustaining investors’ appetite for equities ahead. Of interest too is
the future direction of the US$ given its weakness lately, which could distort global money flows between
asset classes and geographical allocations if the greenback depreciates further.
Local news flows, on the other hand, will still be quite slow this week. Just a few items are anticipated to
trickle in. They are: (a) the Sep plantation statistics to be out on Monday (12 Oct); and (b) the Index of
Industrial Production (IPI) for Aug also due on Monday. That’s about all the routine macro stuff in the weekly
schedule, not that their outcomes will matter much anyway, in terms of short-term stock market
implications. On the corporate scene, however, there may be individual share price actions in response to
possible surprises when the likes of Public Bank (likely to be on Thursday, 15 Oct) and Bursa Malaysia (on
Friday, 16 Oct) release their quarterly earnings announcements.
Yet, light news may be good news for share prices back home. This can then pave the way for our domestic
stock market to track its overseas peers, though we may still lag in pace.
As the saying in technical analysis goes “never buck a trend as the trend is your friend”, we are keeping our
stance that the prevailing momentum will push the FBM KLCI – even after surging 47.5% from its mid-Mar
trough – to extend its uptrend inside the rising channel.
After bouncing up from the bottom of the two parallel trend lines last week, the benchmark index will
probably zigzag its way to challenge the resistance target of 1,255 next. On the downside, its immediate
resistance-turned-support level stands at 1,230 at the moment. Should the FBM KLCI break under the
upward sloping trend line in the near term on heavy profit-taking pressures, the second support line is seen
at 1,190.
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