KLCI to consolidate, hover at 1,720-level

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KUALA LUMPUR (July 27): The FBM KLCI is expected to consolidate today and hover around the 1,720-point level in line with the weaker close at Wall Street.

Metal prices hit multi-year lows on Friday as weaker-than-expected data from China and the euro zone raised concerns about global growth, but the U.S. dollar rose on the prospects of a Federal Reserve interest rate hike, according to Reuters.

Copper fell to its lowest level since 2009 after a survey showed Chinese manufacturing contracted by the most in 15 months in July as orders shrank. Worries grew over demand in the world's biggest metals consumer with stockpiles mounting up, it said.

AllianceDBS Research in its evening edition last Friday said that dampened by the down close in the preceding day, the FBM KLCI had on July 24 opened the day on a negative note.

The research house said the benchmark index subsequently fell to an intraday low of 1,712.49 as market participants continued to stay on the selling side in anticipation of a lower market.

However, it said non-follow through selling pressure in the area of 1,712.49 saw the emergence of supportive buying interest. This lifted the benchmark index to a high of 1,721.45 before settling at 1,720.76 (- 1.68, - 0.10%).

“In the broader market, gainers outnumbered losers with 424 stocks ending higher and 416 stocks finishing lower. That gave a market breadth of 1.01, indicating the bulls were in control with the bears closely matched,” it said.

AlliaanceDBS Research said the benchmark index was holding well above the 1,720 level from July 14 to July 23 until we saw the intraday violation of that support level on July 24.

The research house said market participants with stock positions apparently chose to unload a portion of their stock positions ahead of weekend for the fear of further decline.

“However, the inability of the benchmark index to go lower than 1,712.49 prompted certain market participants to lend a supporting hand.

“This pulled the benchmark index back up above the 1,720 level with a settlement at 1,720.76 in an attempt to keep the market sentiment from deteriorating.

“Given what happened on July 24, the market is likely to consolidate between 1,706 and 1,739 in the coming few days,” it said.

The research house said that indicator wise, the MACD was still above the 9-day moving average line.

“The analysis of overall market action on July 24 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,721.45 level on July 27,” said AllianceDBS Research.