KLCI likely muted on opaque economic outlook

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KUALA LUMPUR (Jan 21): The FBM KLCI is likely to be muted today on lingering worries over the state of the country’s economic growth, going by the lacklustre response to Prime Minister Datuk Seri Najib Razak’s revised Budget announcement on Jan 20.

Even more woorying for investors would be Fitch Ratings’ statement that “the negative outlook indicates that Fitch is more likely than not to downgrade the rating of the sovereign.”

Najib’s revised Budget came amidst a slew of global economic growth cuts by the World Bank Group as well as the International Monetary Fund.

European and Asian equities rose on Tuesday and the dollar climbed 1 percent against the Japanese yen as diminishing global growth prospects bolstered hopes for central bank stimulus, though U.S. stocks fell, according to Reuters.

Crude oil prices fell after the International Monetary Fund cut its 2015 global economic forecast on lower fuel demand and key producer Iran hinted that prices could drop to $25 a barrel without supportive OPEC action, it said.

U.S. stocks closed little changed on Tuesday after the International Monetary Fund reduced its growth forecasts for 2015 and 2016, increasing speculation central banks would take more aggressive policy moves to spark economic improvement, said Reuters.

AllianceDBS Research in its evening edition Tuesday said that despite the up close in the preceding day, the FBMKLCI had on 20 Jan 2015 traded within previous day’s range as market participants decided not to stage an immediate follow through buying.

The research house said that in the absence of supportive buying interest, the benchmark index was in the red throughout the trading sessions before settling at 1,750.11 (- 3.20, - 0.18%).

“In the broader market, gainers outnumbered losers with 418 stocks ending higher and 391 stocks finishing lower. That gave a  market breadth of 1.06 indicating the bulls were in control,” it said.
  
AllianceDBS Research said the inside day indicated a pause
 in the game play.

Given the market movement in recent days, the benchmark index was seen keeping  its position afloat between 1,730 and 1,755. An ability of the benchmark index to overcome the 1,755 level should see the market gearing towards the 1,760 – 1,770 resistance zone.

“However, a fall below 1,730 should induce selling pressure which could send the market down to the subsequent support at 1,718.

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

“The analysis of overall market action on Jan 20 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,745.64 level on Jan 21,” said AllianceDBS Research.