KLCI likely to stay cautious on weaker market sentiment

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KUALA LUMPUR (Nov 18): The FBM KLCI could continue its consolidation mode today on the back of the mixed sentiment at global markets on renewed worries over the global economic growth.

Oil prices fell and global equity markets were mixed on Monday after news that Japan unexpectedly slipped into recession in the third quarter renewed concerns about world growth,according to Reuters.

But two blockbuster acquisitions and anticipation of more European stimulus capped declines and helped lift the S&P 500 to a record closing high on Wall Street, it said.

AffinHwang Capital senior associate director and head of retail research Datuk Dr Nazri Khan in his weekly strategy outlook note on Monday said that following the bearish performance of the global stocks, he expected the FBM KLCI to stage further correction with 1,800 as the immediate target weighed down by weak showing in Europe, unfriendly corporate earnings flow, uncertain prospects for easier monetary policy from the European Central Bank, commodities dip and a risk-off vibe across most safe haven assets.  

Nazri, who is also president of the Malaysian Association of Technical Analyats, said there appeared to be a shift in sentiment taking place, with renewed Ukraine-Russia crisis and slowdown concerns in Europe become an excuse of profit-taking selling pressure after the late October equity market rally.

He said global equity markets should take on a lower track despite China/Hong Kong historic stock links, positive economic readings out of China, Japanese snap election and a dovish statement from the Federal Reserve.

Nazri added the softer economic readings should weigh on Bursa benchmark, but downside was limited due to strong Nikkei and ahead of the Hong Kong/Shanghai trade-link and reports that the People Bank of China was boosting cash to small banks.