Bursa stocks start 2019 with losses on local and China’s PMI contractions

The black shooting-star candlestick on Monday is a top reversal candlestick pattern indicating investors are in a profit-taking mode, says a chartist


The FTSE Bursa Malaysia KLCI (FBM KLCI) ended its first trading day of 2019 in a negative tone after the country’s manufacturing index and China’s weak Purchasing Managers’ Index (PMI) figures hit investor confidence.

The local benchmark slumped 22.47 points, or 1.3%, to 1,668 points at closing bell in tandem with regional markets with 536 losers to 208 gainers, while 278 counters closing unchanged and 835 untraded.

Sime Darby Plantation Bhd fell 21 sen, or 4.4%, Petronas Gas Bhd was down 62 sen, or 3.3%, and Petronas Dagangan Bhd decline 50 sen, or 1.9%.

“The black shooting-star candlestick on Monday is a top reversal candlestick pattern indicating investors were in a profit-taking mode and the weak PMI figures from China and Malaysia made it a good reason to do sell,” said a chartist with a local brokerage yesterday.

Hong Leong Investment Bank Bhd (HLIB) in its trader’s brief noted downside to the local market may be limited.

“We believe the pullback on the FBM KLCI may persist over the immediate term, but based on the technical readings on the MACD (moving average convergence divergence) indicator, which suggested a bullish divergence, the key index could have limited downside risk, potentially leading to a ‘January effect’ bounce. Support will be located around 1,650, followed by 1,630 and the resistance will be pegged around 1,700 to 1,730,” it added.

Elsewhere the MSCI’s Asia ex-Japan stock index closed 1.72% weaker, while China’s blue-chip CSI300 Index fell 1.4% to 2,969.54 points and the Shanghai Composite Index ended down 1.1% at 2,465 points.

The Hang Seng Index fell 2.8% or 715 points, one of the worst openings to a year in the past two decades, off the back of a 14% year-on-year loss for the index in 2018.

Rakuten Trade Sdn Bhd VP of research Vincent Lau noted that the weak PMI readings in China and locally overwhelmed the market.

“This has caused bourse across the region to be swamped in red,” he told The Malaysian Reserve when contacted yesterday.

The Nikkei Malaysia Manufacturing PMI fell to 46.8 from 48.2 in November, while China’s PMI fell to 49.7 in December from 50.2 in November 2018 amid its trade dispute with the US.

A reading above 50 indicates expansion, while a reading below that level signals contraction.

The data saw the ringgit trading weaker against the US dollar as external risks continued to weigh on the local unit.

Despite opening marginally stronger, the local note depreciated to as low as RM4.135 against the greenback yesterday.

“Ongoing US-China trade developments, Brexit-related uncertainty, heightened political risk in Europe, slowing global growth fears and concerns over a partial US government shutdown are poised to fuel risk aversion,” FXTM research analyst Lukman Otunuga said in a research note last week.

“With investors seen avoiding riskier assets amid unfavourable market conditions, safe-haven assets such as gold and the Japanese yen will be in high demand.”

He noted that the prospects of the US economy moderating this year will continue to weigh on the US dollar’s safe-haven status, while the Brexit uncertainty is expected to limit any meaningful gains for the British pound.

“While (the ringgit) has scope to appreciate amid positive domestic economic data, the outlook still remains influenced by external factors such as global trade developments and the US dollar’s performance,” he added.

Oanda Corp’s Asia-Pacific head of trading Stephen Innes said, “currency carry appeal” has the ringgit trading on a stronger footing as markets continue to debate the next move by the US Federal Reserve (Fed) in regard to interest-rate hikes.

“A growing chorus of support suggests the Fed will be on hold until mid-2019 at least. A more dovish Fed will lend support to growth assets and carry trade, and the ringgit should benefit on both fronts,” he said in a research note last week.

The commodity-linked currency has found little support from crude oil prices which traded between US$52 (RM213.20) and US$54 per barrel on the Brent index yesterday — a far cry from the US$86 per barrel level tested last year.

“Oil prices continue to be a concern, but by all accounts, we are nearing a floor and with more stimulus likely to come in the form of more aggressive tax cuts out of China, the commodity will likely benefit which is supportive of the ringgit,” Innes noted.