KLCI likely to stay weak on dampened global sentiment

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KUALA LUMPUR (Dec 2): The FBM KLCI could extend its losses for a fourth straight day today on the back of weaker global growth worries and tepid sentiment among local investors.

World stock markets fell on Monday as slowing factory activity in China and Europe added to worries about weaker global growth and Apple shares dropped, while the yen hit a seven-year low against the dollar before recovering, according to Reuters.

Oil prices rebounded sharply after hitting five-year lows, lifted by data suggesting that tumbling prices may have started affecting drilling activity in the fast-growing U.S. shale oil industry. Gold posted its biggest daily gain in more than a year, it said.

On Wall Street, the S&P 500 suffered its biggest one-day drop in more than a month. Apple was the biggest drag on the S&P 500 and the most actively traded on Nasdaq. Apple ended down 3.2 percent after dropping as much as 6 percent. The cause of the decline was not clear, though traders pointed to high-speed algorithmic trading programs as a potential culprit, said Reuters.

AllianceDBS Research in its evening edition Monday said that dampened by the downside gap left behind on Nov 28, the FBMKLCI had on Dec 1 witnessed a mini market crash.

The research house said the benchmark index broke the 1,800 level to reach the lowest low of 1,768.21 since Oct 20 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 fell 2.89% during intraday trading and held its position near the low end throughout most of the trading sessions before settling at 1,778.27 (-42.62 , -2.34%).

AllianceDBS Research said that in the broader market, losers outnumbered gainers with 981 stocks ending lower and 82 stocks finishing higher.

That gave a market breadth of 0.08 indicating the bears were in control, it said.

“This mini market crash on Dec 1 has taken many market participants by surprise.
 

“The selling pressure was so strong that not only the 1,800 level failed to be protected; the market has also extended its fall to the lowest low of 1,768.21 since 20 Oct 2014,” it said.

The research house said the down move on Dec 1 was no ordinary, because the fall was on a much bigger scale.

“This indicated the presence of intensified selling pressure. The market may have settled off the day’s low, but the down move on 1 Dec 2014 was significantly greater in size than the up move we saw in recent days.

“This should subsequently lead to more downward move in the coming few days. A fall below 1,766 could send the market down to the next support at 1,740,” it said.

AllianceDBS Research said that indicator wise, the MACD was below the 9-day moving average line.

“The analysis of overall market action on Dec 1revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,768.21 level on Dec 2,” it said.