The local blue-chip benchmark climbed to a fresh 21-month high last Tuesday, fuelled by strong gains in oil & gas, utility and plantation heavyweights, on foreign-led buying after the local currency fell sharply to approach USD4.80, the weakest since the Asian financial crisis.
While more investors returned from the Chinese New Year holidays to bargain hunt, market undertone remained cautious given the weak ringgit, and pending fresh domestic catalysts to prop up sentiment and offset caution from recent weakness in the local currency.
Week-on-week, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) added 15.56 points, or 1.01 percent, to 1,549.11, as gains on YTL Corp (+29sen), Public Bank (+7sen), Maybank (+10sen), Sime Darby (+19sen) and YTL Power International (+20sen) offset falls on MISC (-15sen) and Sime Darby Plantations (-7sen). Average daily traded volume last week recovered to 3.72 billion shares, compared to 3.06 billion shares the previous week, while average daily traded value climbed to RM2.70 billion, against the RM2.15 billion average the previous week.
Net foreign buying of RM2.1bn worth of shares year-to-date, driven by the weak Ringgit, undemanding valuation, steady economic growth and stabilising domestic politics, has contributed to the strong recovery in the FBMKLCI so far. To sustain it and improve further the government must display strong resolve to implement various growth measures, and socioeconomic and political reforms without losing sight in tackling its fiscal deficit and rising debt. As such, investors would be interested to know more about the impending meeting on the Johor-Singapore Special Economic Zone this Wednesday, which will be chaired by the prime minister, before both countries meet in March for further discussions.
Among the initiatives highlighted earlier in January were the implementation of a passport-free QR code clearance system on both sides, adopting digitised processes for cargo clearance at the land checkpoints, co-organising investor forums, setting up a one-stop business and investment hub in Johor, and curating training and work-based learning initiatives. Besides, investors will be keenly watching for more clues on the KL-Singapore High Speed Rail project that is estimated to cost RM100bn that will exert more strains on government finance, if not fully funded by the private sector.
Then again, it is almost impossible for the private to pick up the baton without government funding, guarantees and assistance in land acquisition. That aside, investors also will be eager to listen to the new King's first speech in parliament today, which may touch on many aspects of nation building that include developments, socioeconomic issues and reforms, as the august House meets between Feb 26 and March 27. Berjaya Land, IJM Construction and MRCB that had formed a consortium with Keretapi Tanah Melayu to submit a bid for the HSR, apart from six other consortiums, may witness some movement in their share prices.
Apart from that, most of the FBMKLCI 30 component stocks will be announcing their fourth quarter 2023 results this week as the reporting season enters its final leg this week. The outcome is expected to allude to a favourable stronger double-digit earnings growth in 2024 as opposed to a weak single digit expansion in 2023, in line with the recent muted 3.0% YoY expansion in 4Q23 GDP and a stronger outlook this year.
Externally, the United States' second reading of its 4Q23 GDP and core personal consumption expenditure for January this week will be closely monitored to gauge the Federal Reserve's next action while China's Purchasing Managers' Index (PMI) for February provide more clues on business conditions and economic activities. Malaysia's S&P Global Malaysia PMI Manufacturing for this month is also due this week. A favourable reading above the expansion and contraction threshold of 50 should be viewed positively after signs of improvement in demand emerged in January with a reading of 49.0, up from 47.9 in December and the highest since September 2022.
Technical Outlook
Bursa Malaysia rose on Monday led by plantation and oil & gas stocks as more investors returned from the Chinese New Year holidays to bargain hunt. The FBM KLCI climbed 5.06 points to close at 1,538.61, off an early low of 1,530.58 and high of 1,539.25, but losers edged gainers 554 to 447 on total turnover of 3.47bn shares worth RM2.07bn.
The local blue-chip benchmark climbed to a fresh 21-month high on Tuesday, fuelled by strong gains in oil & gas (+5.7%), utility (+0.9%) and plantation (+0.6%) heavyweights, on foreign-led buying after the local currency weakened sharply to approach USD4.80. The FBM KLCI surged 16.98 points, or 1.1%, to end at the day's high of 1,555.59, off an early low of 1,537.94, as gainers led losers 615 to 425 on improved turnover totalling 3.7bn shares worth RM2.94bn.
Stocks stalled for profit-taking consolidation on Wednesday, as investors turned cautious following the ringgit's fall to the lowest since the Asian financial crisis, and await further cues on the US interest rate direction. The FBM KLCI slipped 3.19 points to close at 1,552.40, after ranging between early high of 1,554.95 and low of 1,547.49, as losers beat gainers 652 to 386 on steady turnover of 3.65bn shares worth RM2.71bn.
On Thursday, the blue-chip benchmark dipped for profit-taking breather a second day given overbought conditions after its recent rally to a 21-month high, with losses led by plantation, energy and utility heavyweights. The FBM KLCI fell another 6.91 points to close at 1,545.49, off an early high of 1,551.97 and low of 1,542.72, but gainers led losers 571 to 462 on total trade of 3.72bn shares worth RM2.57bn.
Stocks extended profit-taking breather ahead of the weekend, with most investors sidelined pending fresh domestic catalysts to prop up sentiment and offset caution from recent weakness in the local currency. The index rose 3.62 points to settle Friday at 1.549.11, after oscillating between early low of 1,544.18 and high of 1,551.15, but losers beat gainers 613 to 448 on robust turnover of 4.07bn shares worth RM3.21bn.
Trading range for the blue-chip benchmark index last week expanded further to 25 points, compared to the 21.9-point range the previous week, as it spiked up to a fresh 21-month high last Tuesday. For the week, the FBM-EMAS Index added 114.10 points, or one percent to 11,519.36, but the FBM-Small Cap Index eased 13.52 points, or 0.08 percent to 17,116.34, as small cap stocks fell into profit-taking consolidation.
Last week's profit-taking pullback from a 21-month high on the FBM KLCI has forced a hook-down on the daily slow stochastics momentum indicator in the extreme overbought zone, but the weekly indicator extended its steep rise into the overbought territory. The 14-day Relative Strength Index (RSI) indicator has also hooked down but remained overbought with a reading above 70, while the 14-week RSI indicator stayed high with a more overbought reading at 74.36.
As for trend indicators, the daily Moving Average Convergence Divergence (MACD) signal line has eased off from its recent steep rise, but the weekly MACD sustained its bullish expansion for a strong uptrend signal. The +DI and -DI lines on the 14-day Directional Movement Index (DMI) trend indicator expanded bullishly on a rising ADX line, reinforcing its strong uptrend mode.
Last week's profit-taking pullback from a fresh 21-month high forced hook-downs on short-term momentum indicators from extreme overbought conditions on the FBM KLCI, suggesting further profit-taking consolidation is likely before overbought technical momentum neutralize. Sentiment wise, it is key that positive domestic catalysts support the current uptrend, with focus likely on the proposed high-speed rail from KL to Singapore and the Johor/Singapore Special Economic Zone, given the planned meeting by the federal and state governments in Johor this week, reflecting the government's urgency and commitment in ensuring a smooth and speedy implementation of the projects.
Key index supports cushioning downside on profit-taking pullbacks will be at 1,538, 1,516 and 1,501, the respective rising 10-day, 30-day and 50-day moving averages. Immediate resistance remains at 1,580, with stronger upside hurdles coming at 1,600 and 1,620.
As for stocks picks this week, selected construction, oil & gas and technology counters such as MRCB, Sunway Construction, UEM Sunrise, WCT Holdings, Bumi Armada, Velesto, SKP Resources and VSI should attract bargain hunters for potential rotational plays ahead.