Malaysia’s FBMKLCI index has recently fallen in line with the overall global equity weakness (due to political uncertainties in the US). Is it due for correction?
On a daily chart, FBMKLCI appears to be on an overall uptrend, with multiple minor pullbacks. The likelihood for further correction or downtrend will be higher if the trend breaks below the support zone around 1,728 points.
On a higher time frame (weekly), it appears that the downside risk may not be significant. Nevertheless, consistent with the lower time frame (daily), the support zone around 1,728 will be a test for FBMKLCI whether it can stay above that level.
Fundamentally, FBMKLCI’s trailing P/E is more than 18 time mark, which represents the highest trading P/E since Jan 11. Potential signal for overvaluation?
To sum up the observations, technically, the momentum uptrend for FBMKLCI may be intact but fundamentally, there may be risk of overvaluation. One should be aware for any potential “flash crash” resulting from global political uncertainties.
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