KUALA LUMPUR (Aug 13): The FBM KLCI could come under intense pressure again and may slip below the psychologically crucial 1,600-point level today as a weakened China yuan weighed on global markets overnight.

Stocks, the US dollar, and emerging market currencies around the world remained under pressure for a second day on Wednesday after China's yuan weakened again, a day after the country devalued its currency, according to Reuters.

Major Wall Street averages pared losses by late afternoon, however, as Apple and energy shares reversed direction to trade higher, it said.

AllianceDBS Research in ite evening edition Wednesday said that dampened by the weak down close in the preceding day, the FBM KLCI had on August 12 gapped down on the opening bell as market participants continued to play on the selling side in anticipation of a lower market.

It said under the persistent selling interest, the benchmark index fell sharply to reach a low of 1,603.26 since Feb 22, 2013 before settling off the day’s low at 1,609.93 (-26.78 , -1.64%).

“In the broader market, losers outnumbered gainers with 973 stocks ending lower and 96 stocks finishing higher. That gave a market breadth of 0.09 indicating the bears were highly in control,” it said.

AlllianceDBS Research said the FBM KLCI fell 1.64% on August 12.  

The research house said the stock market appeared to have been full of mini market crashes in recent days with the benchmark index unable to “recover” by the end of the trading day, implying market pessimism among the market participants.

“Many were seen cutting their losses short for fear of more declines, this is evidenced from the explosive market volume of 2.49 billion shares transacted on August 12.

“These mini crashes are believed to be owing to identifiable causes, and a confluence of negative news flow.

“Following the weak down close, the benchmark index is expected to come under pressure to trade lower again with an immediate support at 1,600,” it said.

The research house said a downside penetration of the 1,600 level could push the market down to the next support at 1,570.

It said the hurdle was at 1,635, adding that indicator wise, the MACD was below the 9-day moving average line.

“The analysis of overall market action on August 12 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,603.26 level on August 13,” said AllianceDBS Research.