Market Outlook as at April 8, 2019

Last week was a trying week for Malaysia! On Wednesday, we received the shocking finding of the Suhakam public inquiry into 2 missing persons, Pastor Raymond Koh and social activist Amri Che Mat. The committee found both persons were victims of forced disappearance that might be linked to our police force (here). 

Just as that shocking news began to sink in, we were hit by another shocking revelation on Saturday. This time, it came from the Prime Minister and the Foreign Minister who spoke about the hidden elements in the "deep state" that are threatening to topple the Government over the country signing the Rome Statute of International Criminal Court (here and here). These 2 news cast doubt on the stability of the current government and its continued ability to maintain law and order in the country. 

It is indeed a pleasant surprise that our market did not react negatively to the news today. In fact, FBMKLCI was up 2-3 points this morning before it dipped to overnight level at around 3:00 pm. I have expected the market to be weaker today, and to remain weak for a while until we have greater clarity that the threat to the current government has passed.

Looking at the 4 charts below, we can see FBMKLCI, which represents our blue chip stocks, has broken below the line connecting the lows for the past 9 years. This index is expected to stay weak as more foreign funds would reduce their position in view of the political risk. On further weakness, FBMKLCI may drop to 1600-1610.


Chart 1: FBMKLCI's weekly chart as at April 5, 2019 (Source: Malaysiastock.biz)

FBM70, representing 2nd & 3rd liner stocks, has tested the line connecting the lows for the past 9 years and rebounded from it.


Chart 2: FBM70's daily chart as at April 5, 2019 (Source: Malaysiastock.biz)

FBMSCAP, which represents the small cap stocks, has dropped back to where it was 9 years ago.


Chart 3: FBMSCAP's daily chart as at April 5, 2019 (Source: Malaysiastock.biz)

Strangely, FBMFLG, which represents the lowest rung of stocks on our exchange, is still in an uptrend line.


Chart 4: FBMFLG's daily chart as at April 5, 2019 (Source: Malaysiastock.biz)

In this uncertain time, the best approach is to stay at the sideline. If you want to take a position for whatever reason, you are advisable to take only a minimum position. Good luck!