KLCI to consolidate, trend sideways at best

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KUALA LUMPUR (July 29): The FBM KLCI is expected to extend its consolidation and likely hover at the 1,700-point level today on the back of the weaker sentiment at the local market with a lack of fresh catalysts.

Although the reshuffle of the Cabinet yesterday as announced by Prime Minister Datuk Seri Najib Razak could be viewed by some as new development, the move which has effectively prolonged the probe into the 1MDBD saga could also be seen as a negative for the market.

US and European stock markets climbed 1% or more on Tuesday, reversing five days of declines, as investors looked past China's equities sell-off and took buying cues from earnings and mergers news, according to Reuters.

Prices of safe-haven government bonds eased, while the dollar rallied on growing expectations the Federal Reserve, in a policy statement due on Wednesday, could take a hawkish bias toward raising interest rates. Oil prices recovered from six-month lows and steadied on hopes US crude stockpiles were shrinking, it said.

AllianceDBS Research in its evening edition Tuesday said that dampened by the weak down close in the preceding day, the FBM KLCI had on July 28 broken the 1,706 level to settle at the low of 1,699.70 (-10.06, -0.59%) as market participants continued to play on the selling side in anticipation of a lower market.

“In the broader market, losers outnumbered gainers with 726 stocks ending lower and 197 stocks finishing higher. That gave a market breadth of 0.27 indicating the bears were in control,” it said.

AllianceDBS Research said the benchmark index continued to make lower low for 4 consecutive days with sellers being the dominant force in the game play again.

The research house said the down side violation of the 1,706 level on July 28 was expected to be viewed a negative development for the market in the coming few days because many market participants were earlier seen hoping the benchmark index to hold at the 1,706 level after losing the battle at 1,720 on July 27.

“Following the weak down close at 1,699.70 on 28 Jul 2015, the market is under pressure to test the immediate support at 1,685.

“A fall below 1,685 could send the benchmark index down to the low of 1,671 registered on Dec 17, 2014,” it said.

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

“The analysis of overall market action on July 28 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,699.70 level on July 29,” said AllianceDBS Research.