KLCI likely to trend down on weaker global equity sentiment

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KUALA LUMPUR (Nov 5): The FBM KLCI is likely to trend downward today in line with the weaker global equity markets sentiment.

Global equity markets fell on Tuesday and the euro strengthened after a Reuters report saying central bankers in the euro area plan to challenge European Central Bank President Mario Draghi's leadership style, according to Reuters.

The bankers plan to challenge Draghi over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said, it reported.

AllianceDBS Research in its evening edition Nov 4 said that dampened by the down close in the preceding day, the FBM KLCI had on Nov 4 traded lower to 1,845.52 as market participants continued to play on the selling side in anticipation of a lower market.

The research house said that under the stronger selling interest, the benchmark index kept its position near the low end throughout the trading sessions before settling off the day’s low at 1,847.36 (- 5.98 , - 0.32%).  

It said that in the broader market, losers outnumbered gainers with 438 stocks ending lower and 378 stocks finishing higher.

That gave a market breadth of 0.86 indicating the bears were in control, said the research house.

AllianceDBS Research said the benchmark index registered its first lower high on Nov 4 after making a series of higher high for 11 consecutive days.

It said the lower high was not a surprise given the recent strong run up from 1,766 (17 Oct 2014) to 1,858 (3 Nov 2014) in reaction to the fall from 1,896 (8 Jul 2014) to 1,766.

Following the down close, the benchmark index is likely test lower level again in the coming few days with immediate support seen at 1,838, it said.  

The research house said a breach of 1,838 would put pressure on the market down to the subsequent support at 1,830.

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

“The analysis of overall market action on Nov 4 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,845.52 level on Nov 5,” it said.