KUALA LUMPUR (Jan 6): The 1,650-point level support is still seen intact for the FBM KLCI today given the flat overnight close at most global markets.
Stocks at the local bourse are ripe for bargain hunting after the massive selldown on Jan 4, but overally sentiment still remains jittery.
Global equity markets were flat on Tuesday after their worst January kick-off in years as concerns about the global economy weighed on sentiment and pushed traders to seek the relative safety of the low-risk yen, according to Reuters.
Crude oil prices fell on concerns about the pace of growth in China, the world's second-largest oil consumer. News that Chinese rail freight volumes logged their biggest-ever annual decline in 2015 added to economic growth worries, it said.
AllianceDBS Research in its evening edition Tuesday said despite the weak down close in the preceding day, the FBM KLCI had on Jan 5 traded marginally lower to 1,653 as some market participants chose to play a selling game in anticipation of a lower market.
However, the research house said non-follow through selling pressure in the area of 1,653 prompted risk taking buyers to establish stock positions.
It said this lifted the benchmark index to a high of 1,673.17 before settling at 1,665.70 (+12.33, +0.75%).
“In the broader market, gainers outnumbered losers with 541 stocks ending higher and 346 stocks finishing lower. That gave a market breadth of 1.56 indicating the bulls were in control,” it said.
AllianceDBS Research said the FBM KLCI did not suffer another day of loss on Jan 6.
“The benchmark index had only fallen marginally to a low of 1,653 because sellers did not offload aggressively for the fear of market turnaround after the opening bell as the index was merely 3 points away from the 1,650 support level.
“While the up close on 6 Jan 2016 may have come at the right time to provide a breathing space to many market participants, it remains pre-mature to confirm a change to uptrend at this juncture.
“We must first see a much stronger buying demand interest in the coming few days because the downside gap left behind on Jan 4 with almost 40 points loss has painted a bearish picture,” it said.
The research house said a fall below 1,650 would put pressure on the market down to the subsequent support at 1,640.
It said that indicator wise, the MACD was still below the 9-day moving average line.
“The analysis of overall market action on Jan 5 revealed that buying power was stronger than selling pressure.
“As such, the FBM KLCI would likely trade above the 1,673.17 level on Jan 6,” said AllianceDBS Research.