BURSA Malaysia tends to rise during the week before budget announcements, a study by JF Apex Securities Bhd shows.
The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI)’s gain a week prior to the budget was seen in 11 out of 13 years previously, JF Apex said, adding that the 11 years posted an average gain of 1.1 per cent. The exception to the trend in 2002 was due to the market’s downtrend while in 2003, there was the severe acute respiratory syndrome outbreak.
Apart from new budget policies to be announced, the market performance is also subjected to economic developments in the United States, Europe and China (interest rate and financial stimulus), geopolitical tension in Iraq and the recent Hong Kong protests.
“Investors should bear in mind that the budget rally this year, if any, would have a chance of facing immediate profit-taking as shown by historical trend in the past 13 years. Budget “rallies” are often followed by quick profit-taking,” JF Apex said in a report yesterday.
Looking at the KLCI’s performance in the past years, it noted that investors tend to cash out after the budget announcement as shown in seven out of the 11 years when there were pre-budget gains.
“Post-budget profit-taking saw investors sold down the KLCI in five consecutive years from 2005 to 2009 before a flat performance in 2010. Years 2011 and 2012 saw gains of three per cent and 1.4 per cent, respectively, before a drop of 0.4 per cent last year.”
JF Apex said in the past two months, the FBM KLCI retreated from a historical high of 1,896.23 points. It has been trending sideways between 1830 and 1855 points in the previous two weeks.
“If history is going to repeat itself, the FBM KLCI could breach the immediate resistance of 1,855 points. For the downside, the index tested the 200-day moving average and could enter into a downward correction if the support of 1,830 points fails to hold,” it added.