Can Budget 2018 buoy KLCI?

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Budget 2018 will be tabled on 27/10/2017. Prime Minister Najib Razak has said the budget will address the cost of living for citizens and also housing issues, according to the official Bernama news agency. So can budget 2018 buoy KLCI which was Southeast Asia’s Worst Stock Market this year?

Let us look at the KLCI performance in the past few years when the budget was tabled:

Conclusion:

1. As you can see from the past performance highlighted in above figures, the announcement of Budget was not a factor to reverse any of the KLCI trends. The underlying market trend remains as the dominant force, while short term trend triggered by the announcement of Budget is extremely short and full with uncertainties.

2. Looking back to weekly KLCI chart to determine the underlying trend, KLCI broke 1755 on 20/10/2017 which was viewed as the support of the latest consolidation. Worries started to arise whether KLCI is heading downwards and a new downtrend will be initiated. As seen from the chart, the next immediate support is located at 1727. Hence, next week will be a crucial week whether KLCI will break below 1727 or rebound after touching 1727.

3. We believe that if KLCI touches 1727 and starts to rebound, Budget 2018 will serve as a key catalyst to buoy KLCI which was the worst Southeast Asia’s Worst Stock Market this year.

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