Kenanga Futures’ Wee said that it is typical for the gap to widen post-earnings season.
PETALING JAYA: The seemingly big gap between FBM KLCI and the September FBM KLCI futures (FKLI) contract is normal, according to a dealer and not indicative of a possible correction on the cash market.
Kenanga Futures’ Derrick Wee told StarBiz that it is typical for the gap to widen post-earnings season.
“You can see this happening especially after the peak of results seasons in February, May, August and November. The gap would widen because investor sentiment would be boosted by listed companies’ earnings performance and the announcement of dividends.
“Following the earnings reporting season of August, FBM KLCI moved higher this month with a bigger gap from FKLI,” he said.The gap between the cash and futures spot month was at some 15 points at yesterday’s close. The FBM KLCI closed at 1,453.39 points while the September contract closed at 1,437.50 points.
According to Wee, the gap is narrowing as the futures spot month contract was at 22 points discount to the cash market on Aug 30.“In the next two weeks as we near the end of September, the gap will narrow further,” he said.
FKLI is traded on Bursa Malaysia Derivatives, providing market participants exposure to the underlying FBM KLCI constituents.
RHB Retail Research analyst Joseph Chai said that FKLI is consolidating near the 50-day simple moving average line support level.
In a note, Chai also recommended traders to maintain their short positions, foreseeing a weakening momentum ahead for FKLI.
“Any upcoming rebound is expected to be limited – possibly reaching the 1,450 points resistance,” he added.
