Fundamental vs Technical Analysis: A Bursa Guide

What is fundamental analysis?

Fundamental analysis is the analysis of a business’s financial statements, usually its assets, liabilities and earnings, along with its health, competitors and markets ^[1]. It can also consider the wider economy, including interest rates, employment and GDP ^[1].

Its aim is to understand what a business is worth and how it is doing, using historical and present data to support financial forecasts ^[1]. In practice, it asks questions such as how much profit the company makes, who its customers are and how much debt it carries.

InvestSmart, the SC’s investor education arm, compares investors to bankers: before lending, a banker reviews documents, and before investing, a shareholder should review a company’s annual reports, quarterly reports and presentations to learn the business, its profit and its debt level ^[2]. The statements it highlights are the income statement and the balance sheet ^[2].

Fundamental analysis has limits as well. A report describes the past, estimates can be wrong, and a sound business can still trade at a poor price. Our guide on how to read a quarterly report walks through the main parts, and the financial statements feature organises them.

What is technical analysis?

Technical analysis looks at trends and price levels, and its analysts mainly evaluate historical trends and ranges to try to anticipate future price movement ^[1]. It is based on the idea that recognisable chart patterns reflect investors’ emotional responses to price movement ^[1].

Its inputs are price and volume history. In the Bursa context, these are the open, high, low and close of each trading day, along with the number of shares traded. Tools include moving averages, support and resistance levels, and indicators.

It is a contested field. Some analysts use subjective judgement to pick the pattern a chart is showing, and academic scrutiny has been limited by that subjectivity ^[3]. One academic study summarised there concludes that technical trading showed no statistically significant out-of-sample forecasting power for most of the stock indices it examined, although the same page notes that many other studies reported positive results, so the evidence is mixed ^[3]. Treat chart tools as a way to organise what price has done, not as a forecast.

You can explore these tools on the technical chart, using end-of-day data.

What data does each need on Bursa?

The table shows the typical inputs for each approach. Neither list is complete.

For fundamentals, the key documents are published by the company: annual reports, quarterly reports and investor presentations ^[2]. For technical work, you need a clean history of daily prices and volumes, and the more thinly traded the counter, the less reliable its chart tends to be.

Which time horizons suit each?

The two methods tend to run on different clocks, though neither has a fixed horizon. Fundamental information changes when a company reports, so its rhythm follows the reporting cycle of annual and quarterly results ^[2]. Technical readings can be refreshed after every trading day, so they respond to what price did most recently ^[3].

That does not make fundamentals slow and technicals fast in any rule-like way. InvestSmart cautions that investing in stocks is a long-term decision and that people should not expect fast rewards ^[4]. A person who trades on short charts and a person who holds for years may both read the same company, but they ask different questions of it.

Pick the horizon first, then choose the tools that fit it. Writing down your intended holding period before you study a stock avoids drifting from one method to another when results disappoint.

Can the two be combined?

Yes. Investors can use one or both methods, and the two are described as complementary ^[1]. Many technical analysts also combine technical work with other methods ^[3].

Finworld’s themes put it simply: a good stock is not always a good entry. Fundamentals help you judge the business, while charts and volume help you think about timing and risk, such as where price has paused before. Combining them is a way to ask two separate questions.

A simple sequence is:

• Use fundamentals to decide whether the business is worth following.
• Use end-of-day charts and volume to see where price stands relative to its history.
• Write down what would change your view, and by how much you could afford to be wrong.
• Review the result later, whatever it was.

Finworld’s stock scorecard is an educational score that brings fundamentals, volume, technicals and liquidity into one view, and it is not a buy signal. Our page for beginners suggests where to start. InvestSmart’s guide mentions a minimum purchase of 100 units per transaction ^[4]; confirm the current board lot with your broker or Bursa Malaysia before sizing any position.

Frequently asked questions

Sources

1. Wikipedia — Fundamental analysis: scope, goals, and use of fundamental and technical methods as complements
2. InvestSmart (Securities Commission Malaysia) — How to Invest in Stocks Like a Pro: reviewing annual and quarterly reports, income statement and balance sheet
3. Wikipedia — Technical analysis: use of price trends, subjectivity, limited academic evidence, combination with other methods
4. InvestSmart (Securities Commission Malaysia) — A Guide to Stocks: long-term decision, minimum of 100 units per transaction

See how Finworld organises Bursa Malaysia research