KLCI to find support at 1,700

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KUALA LUMPUR (June 29): The FBM KLCI is expected to trend lower in line with the fall at most global markets last Friday as worries over the Greece debt crisis lingers and weighed on most markets, but the local benchmark index is expected to find some support at the crucial 1,700 point level.

The one bright spark at the local bourse may be the listing of Sedania Innovator Bhd, but that too may not be enough to boost investor sentiment and indeed, Sedania may end up a victim of the tepid global sentiment.

World stock markets slipped and the euro fell on Friday, with investors cautious ahead of a meeting in Europe that could decide whether Greece will default on loans, according to Reuters.

The S&P 500 ended nearly flat, though shares of U.S. chipmakers fell after a weak forecast from Micron Technology Inc, it said.

AllianceDBS Research in its evening edition last Friday said the FBM KLCI had on June 26 opened the day on a negative note with a downside gap.

The research house said the benchmark index subsequently traded down to a low of 1,709.87 as market participants continued to play on the selling side in anticipation of a lower market.

It said under the persistent selling pressure, the benchmark index was in the red throughout the trading sessions before settling near the day’s low at 1,710.47 (- 6.34 , - 0.37%).

“In the broader market, losers outnumbered gainers with 441 stocks ending lower and 345 stocks finishing higher. That gave a market breadth of 0.78 indicating the bears were in control,” it said.

AllianceDBS Research said the market sentiment turned unfavourable after the weak market settlement below the 1,718 support on June 25.

The research house said this had subsequently led to the downside breakout of the recent low of 1,714 (June 18) on June 26.

“Market participants had chosen to liquidate their stock positions further instead of looking for a right timing to scoop up some of the beaten down stocks.

“Following the down close at 1,710.47, the market is expected to test lower level again with immediate support zone pegged between 1,700 and 1,706. Will the benchmark index be able to protect its fort at 1,700?

“Psychologically, we should see sellers scaling down their selling activity with risk taking buyers buying into the market as the benchmark index approaching the 1,700,” it said.

However, the research house said the demand and supply forces would determine who will be the winner at the 1,700 level.

Indicator wise, it said the MACD was above the 9-day moving average line.

“The analysis of overall market action on June 26 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,709.87 level on June 29,” said AllianceDBS Research.