KLCI expected to stay weak on lack of fresh catalysts

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KUALA LUMPUR (June 19): The FBM KLCI is expected to stay weak today as local investor sentiment remains wary given the lack of fresh catalysts.

Among the heavyweights, Tenaga Nasional Bhd could continue to weigh on the local market sentiment after the company shed 56 sen or 4% to close at RM12.60 to become the biggest decliner on the exchange yesterday on news the state-owned utility would buy a 70% stake in Malaysia's 3B power plant project from 1Malaysia Development Bhd (1MDB).

Stock markets around the world rallied on Thursday, while the U.S. dollar fell, a day after the Federal Reserve signalled that interest rates would rise more slowly than many had expected, according to Reuters.

While uncertainty over Greece continued to weigh on sentiment, hopes that a deal would be reached returned European equities to positive territory, it said.

AllianceDBS Research in its evening edition Thursday said  despite the up close in the preceding day, the FBM KLCI had on June 18 broken the 1,718 support after opening the day on a negative note.

The research house said the benchmark index fell to an intraday low of 1,714.22 as market participants changed their game play pattern from buying (June 17) to selling (June 18).

It said that under the persistent selling pressure, the benchmark index kept its position near the low end throughout the trading sessions before settling off the day’s low at 1,718.12 (down 8.74 points or 0.51%).

“In the broader market, gainers outnumbered losers with 380 stocks ending higher and 369 stocks finishing lower. That gave a market breadth of 1.02 indicating the bulls were in control with the bears closely matched,” it said.

AllianceDBS Research said that having stayed supportive above the 1,718 level on June 16 & 17, the benchmark index was earlier expected to consolidate between 1,718 and 1,752 in the subsequent few days.

However, the research house said the market turned its position around to break the 1,718 support on June 18.

It said this reversal may be unexpected but it did not come as a big surprise because there was a small resistance selling zone between 1,727 and 1,733.

“The inability of the market to trade higher than 1,727.30 prompted renewed selling pressure, which pushed the benchmark index down to a low of 1,714.22.

“Following the down close at 1,718.12 on June 18, the benchmark index is seen under pressure to break below the 1,718 level again.

It said a fall below 1,718 would put pressure on the market down to the subsequent support zone, 1,700 - 1,707.

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

“The analysis of overall market action on June 18 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,714.22 level on June 19,” said AllianceDBS Research.