'Hungry bears' halt KL stocks rally: OSK

 

MALAYSIA'S benchmark stock index may extend declines after sliding below the 100-day moving average, halting a rally that lasted almost a year, according to OSK Research Sdn Bhd.

Malaysia’s FTSE Bursa Malaysia KLCI Index slumped 1.4 per cent to 1,247.90 on Feb. 5, the steepest decline since Aug. 17, and below the 100-day moving average of 1,258.17. Ten-day implied volatility on the stock index rose to 10.6 that day, the highest level since Aug. 27, data compiled by Bloomberg show.

“The breakdown has caused significant damage to the market’s technical landscape,” OSK analyst Shin Kao Jack said in a report today. “The massive rally that started in March last year officially came to an end last Friday.”

The Kuala Lumpur stock index rallied 45 per cent last year on investor optimism Prime Minister Najib Razak’s stimulus plans valued at RM67 billion will pull the economy out of recession. The benchmark gauge may eventually “retrace” to the 200-day moving average line at 1,175, said Shin. The index dropped 0.3 percent to 1,244.02 as of 11:03 a.m. local time, the first time it has stayed below the 100-day moving average for two days since March.

“For nearly a year, the bears had nearly nothing to bite,” Shin said. The drop below the 100-day moving average on Feb. 5 has paved the way for the “extremely hungry bears,” he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a security, commodity, currency or index. Support is a level where buy orders may be clustered, while resistance is where there may be sell orders. - Bloomberg