KLCI expected to trend lower, hover around 1,800 region

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KUALA LUMPUR (May 13): The FBM KLCI is expected to trend lower today and hover around the crucial 1,800-points level on the back of the overnight weaker close at Wall Street.

German bond yields climbed on Tuesday on optimism that inflation may have bottomed in the euro zone, lifting demand for the euro, while volatility in global bond markets weighed on stock indexes, according to Reuters.

U.S. 10-year Treasury yields hit six-month highs before steadying as some buyers came back to the market, helping the government sell $24 billion in new three-year notes, it said.

U.S. stocks ended down slightly as the move in bond yields unsettled investors already concerned about an eventual Federal Reserve interest rate hike, said Reuters.

AllianceDBS Research in its evening edition Tuesday said that dampened by the weak down close in the preceding day, the FBM KLCI had on May 12 gapped down to break below the 1,800 psychological level to reach a day’s low of 1,797.01 as market participants continued to play on the selling side in anticipation of a lower market.

The research house said that under the stronger selling interest, the benchmark index was in the red throughout the trading sessions before settling near the day’s low at 1,798.61 (- 6.88 , - 0.38%).

“In the broader market, losers outnumbered gainers with 576 stocks ending lower and 240 stocks finishing higher. That gave a market breadth of 0.41 indicating the bears were in control,” it said.

AllianceDBS Research said the market witnessed further selling pressure on May 12.

The research house said this could be evidenced from the downside gap left behind on the chart and the downside penetration of the 1,800 level.

It said market participants remained unwilling to lend a stronger supporting hand at this juncture even though  the benchmark index has lost 70 points [1,867 (April 27) minus 1,797 (May 12)] over the past 10 days.

“Given the down close at 1,798.61 on May 12, the benchmark index is expected to test a lower level again with subsequent support seen at 1,770.

“The overhead resistance is at 1,815,” it said.

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

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

“As such, the FBM KLCI would likely trade below the 1,797.01 level on May 13,” said AllianceDBS Research.