KLCI likely to extend poor run on global growth woes

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KUALA LUMPUR (Jan 15): The FBM KLCI is likely to extend its poor run today, in line with the overnight slump at global markets.

Global investor sentiment, already rattled by declining crude oil prices, took another hit when the World Bank lowered world growth forecasts for the next two years.

Securities around the world fell on Wednesday after the World Bank cut its economic growth forecasts for 2015 and 2016, with stocks down across regions and copper suffering its biggest one-day drop in more than three years, according to Reuters.

The outlook fueled fears that the benefits of cheaper oil may be offset by anemic economies and the threat of deflation, sending investors to seek safety in government debt, while the U.S. dollar slumped against the yen, it said.

The S&P 500 fell for a fourth straight day, while the CBOE Volatility index extended its year-to-date advance to 13.6 percent, said Reuters.

AllianceDBS Research in its evening edition Wednesday said despite the strong up close in the preceding day, the FBM KLCI had on Jan 14 traded within previous day’s range to form an inside day bar as market participants decided not to stage follow through buying activities.

It said that in the absence of supportive buying interest, the benchmark index was in the red throughout the trading sessions before settling off the day’s low at 1,742.01 (-6.89 , -0.39%).

“In the broader market, gainers outnumbered losers with 450 stocks ending higher and 349 stocks finishing lower. That gave a market breadth of 1.28 indicating the bulls were in control,” it said.

AllianceDBS Research said the inside day indicated a pause in the game play.

It said given the market set-up pattern in the last 6 days, the benchmark index was likely to trade between 1,718 and 1,751 in the coming few days with both the buyers and the sellers expected to exchange their stock positions in an attempt to win control.

The research house said a fall below 1,718 would put pressure on the market to go down south with support zone seen between 1,700 and 1,707.

However, it said the emergence of supportive buying demand should see a test of recent high of 1,770 (30 Dec 2014).

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

“The analysis of overall market action on Jan 14 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,736.77 level on Jan 15,” said AllianceDBS Research.