KLCI broke above its short-term downtrend

The continued rise in Asian stock markets today raises our hope that the current correction may be coming to an end. Let's start with KLCI.

Our KLCI tested its short-term downtrend line at 1080 yesterday. It broke above that downtrend line today after gaining 10.5 points to close the morning session at 1090. With this breakout, the downside risk of our market has now reduced considerably. While not promising an immediate uptrend, this breakout would likely to be followed by a sideway market (instead of a down-trending market) at the very least.


Chart 1: KLCI's daily chart as at July 15, 2009_at 12.30 noon (Source: Quickchart)

Besides KLCI, the AORD may have broken above its short-term downtrend line resistance at 3860. AORD is now at 3917. STI is closing in on its short-term downtrend line, with resistance at 2350. STI closed the morning session at 2344.


Chart 2: AORD & NIKK's daily chart as at July 14, 2009 (Source: Stockcharts.com)


Chart 3: TWII & STI's daily chart as at July 14, 2009 (Source: Stockcharts.com)


Chart 4: BSE & NIKK's daily chart as at July 14, 2009 (Source: Stockcharts.com)

The recovery in our KLCI may have been aided by the recent change in the component stocks of the KLCI. In fact, the KLCI as it's known today is not the same as the old KLCI. The latter is a 100-stock index while the current one is a 30-stock index. Its full name is FTSE Bursa Malaysia KLCI & it adopted the acronym of old index, KLCI. Two of the biggest beneficiaries of this exercise is Public Bank & Commerce. With increased weightage in the main index, Public Bank & Commerce enjoyed additional flow of investment funds which sent their share price higher. The sharp run-up in their share price has in turn boost the KLCI.

PS- As at 4.45 pm, DAX & FTSE have broken above their short-term downtrend line, with resistance at 4800 & 4260, respectively. DAX & FTSE are presently at 4852 & 4285, respectively.