KLCI to trade range bound as local sentiment still jittery

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KUALA LUMPUR (Jan 27): The FBM KLCI is expected to trade range-bound today as while global sentiment appeared to have improved after the Greek elections, local investors seem reluctant to dabble in riskier assets and prefer to remain on the sidelines in the absence of fresh domestic catalysts.

At the global markets, the euro rebounded from two days of sharp losses on Monday even after an anti-bailout party was victorious in Greek elections, while global stock indexes edged up on confidence in the European Central Bank's new money-printing program, according to Reuters.

The electoral results spurred concern over new instability in the euro zone, although the possibility of Greece leaving the bloc was considered remote, it said.

Meanwhile, US stocks edged higher on Monday as investors brushed off fears that a leftist victory in Greece would bring fresh crisis to the Eurozone and energy stocks advanced, said Reuters.

AllianceDBS Research in its evening edition Monday said the FBM KLCI had on Jan 26 traded within last Friday’s range to form an inside day bar as market participants changed their game play from buying to selling.

It said that in the absence of supportive buying interest, the benchmark index kept its position near the low end throughout most of the trading sessions before settling off the day’s low at 1,796.44 (-6.64 , -0.37%).

“In the broader market, losers outnumbered gainers with 559 stocks ending lower and 312 stocks finishing higher. That gave a market breadth of 0.55 indicating the bears were in control,” it said.

AllianceDBS Research said the inside day should not pose a big surprise as the benchmark index had already chalked up 77 points or 4.44% in the last 5 days from the low of 1,732 (16 Jan 2015) to the high of 1,809 (23 Jan 2015).

It said following the down close on Jan 26, the market was expected to trade lower with an attempt to fill the downside gap left behind at 1,787 on 23 Jan 2015.

It said a fall below 1,787 could send the benchmark index down to the subsequent support zone, 1760 – 1,770.

The research house said the overhead resistance remains at 1,810, adding that indicator wise, the MACD was above the 9-day moving average line.

“The analysis of overall market action on Jan 26 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,792.65 level on Jan 27,” said AllianceDBS Research.