KLCI to extend consolidation phase, struggle to keep 1,700-level

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KUALA LUMPUR (Oct 27): The FBM KLCI is expected to extend its consolidation phase today and struggle to keep its 1,700-point level in line with the overnight slip at most global markets, given the lack of fresh domestic catalyst to spur local investor sentiment.

Global equity markets slipped on Monday, pausing after a four-week rally ahead of policy announcements from central banks in the United States and Japan later in the week, while the dollar weakened in the wake of soft U.S. housing data, according to Reuters.

Stock markets rallied last week on the potential that Japan's already-massive stimulus would be further increased after China cut interest rates last week and the European Central Bank indicated it may add to its asset purchase program in December, it said.

AllianceDBS Research in its evening edition Monday said the FBM KLCI had on Oct 26 only traded to a high of 1,715.95 after opening the day on a positive note, but weak follow through buying support in the area of 1,715.95 prompted profit taking  activity, which brought the benchmark index down to 1,703.09 before settling at 1,706.79 (down 4.14 points or 0.24%).

“In the broader market, losers outnumbered gainers with 466 stocks ending lower and 402 stocks finishing higher. That gave a market breadth of 0.86 indicating the bears were in control,” it said.

AllianceDBS Research said the lower high and lower low on Oct 26 indicated that sellers were in better control over the buyers.

“Given the way this market carried itself in recent days, the benchmark index is expected to stay between 1,695 and 1,717 in the coming few days until we see a breakout to the upside or a downside.

“A fall below 1,695 could send the market down to the subsequent support at 1,680.

“However, a rise above 1,717 would lift the market to the next hurdle at 1,730,” 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 Oct 26 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,703.09 level on Oct 27,” said AllianceDBS Research.