KLCI to drift lower unless quality buying emerges

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KUALA LUMPUR (July 30): The FBM KLCI is expected to drift lower today despite the overnight uptrend at most global markets, given the lack of quality buying at the local market.

Global equity markets rose on Wednesday, lifted by strong U.S. and European corporate earnings and a Federal Reserve statement that said the U.S. economy continues to strengthen, adding to expectations an interest rate hike is getting closer, according to Reuters.

Fed officials said they felt the U.S. economy had overcome a first-quarter slowdown and was "expanding moderately" despite a downturn in the energy sector and headwinds from overseas, it said.

AllianceDBS Research in its evening edition Wednesday said that dampened by the weak down close below in the preceding day, the FBM KLCI had on July 29 opened the day on a weak note as market participants continued to play a selling game in anticipation of a lower market.

The research house said that in the absence of stronger buying interest, the benchmark index kept its position in the red throughout most of the trading sessions before settling at 1,698.99 (-0.71 , -0.04%).

“In the broader market, gainers outnumbered losers with 444 stocks ending higher and 371 stocks finishing lower. That gave a market breadth of 1.19 indicating the bulls were in control,” it said.

AllianceDBS Research said the market continued to fall on July 29 with the benchmark index making lower low for 5 consecutive days.

“Market sentiment remains weak since the downside violation of the 1,720 level on July 27, this can be seen from the lower high in the last 2 days as market participants chose not to commit on the buy side for fear of a further decline.

“Without good quality buying demand in the game play, the benchmark index is likely to drift lower with an immediate support at 1,685,” it said.

The research house said the hurdle was pegged at 1,706.

It said that indicator wise, the MACD was below the 9-day moving average line.

“The analysis of overall market action on July 29 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,696.72 level on July 30,” said AllianceDBS Research.