Slow and steady will probably be the way for our Malaysian bourse to go as we enter the final weeks of 2009 before Christmas.

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) tumbled first and recovered later, rising from a trough of 1,255.76 on Wednesday before finishing the week at 1,260.00, down 10.2-point or 0.8% from two Fridays ago. Elsewhere, the FBM 70 Index was up marginally (+0.3%) but the FBM ACE Index plunged 2.5% through the week. There was no heavy selling though as daily average volume lightened to 588.7m shares (from 813.6m units) valued at RM784.4m (versus RM1.1b previously).

News flows on tap will remain dry for the moment. In the week ahead, the significant talking point will possibly be just the U.S. Federal Open Market Committee meeting scheduled on Tuesday and Wednesday (15-16 Dec). While the policy makers will likely keep the federal funds rate where it is for now, by listening to the rhetoric, investors will focus their thoughts on: (a) if and when the U.S. monetary policy will begin to tighten; and (b) whether the U.S. economy is firmly on the road to recovery.

Sniffing around, it feels like investors want to wind down for the year already as fresh developments get thinner by the day so we will keep this week’s write-up short and simple. Trading activity – which started to contract in early Dec – would still go slow with just four working days in the coming week (and that is also the case for next week and the week after next). The last time daily trades were fewer than 700m shares for an extended period was in second half of Aug, when it more or less dragged on for seven weeks.

Yet, this does not mean share prices will necessarily drift south in tandem with the shrinking interest. Rather, it could present a window of opportunity for our local bourse to climb gradually but steadily. And the proponents of window dressing effect will tend to agree with this view as Dec has almost always turned out to be a profitable month (up in 19 out of the past 22 years with an average positive monthly return of 5.1%) based on historical study.
















From a technical perspective, the FBM KLCI has now slipped out of the positive sloping channel after falling for three consecutive weeks. This losing streak marks the longest stretch – in terms of consolidation time – since the market rally began in mid-Mar this year, although the percentage drop (from peak-to-trough) at 3.1% remains at the low end of the 2%-7% correction range seen over the last nine months (refer to picture overleaf). Even so, there is a chance for the benchmark index to grind its way up amid a quiet market ahead. On the chart, selective buying may lift the FBM KLCI – standing near its five-week low now – to higher levels along a
short-term upward passage (as temporarily plotted by the two red parallel trend lines). In which case, the bellwether is poised to test and overcome the resistance hurdles of 1,280 (immediate) and 1,305 (next), respectively. Downside risk, on the other hand, seems to be protected by the support lines of 1,255 (first) and 1,230 (second) going forward.