KUALA LUMPUR (April 20): The FBM KLCI is expected to remain cautious today, with gains seen limited on the back of the weaker close at most global markets.
Global equity markets fell on Friday on reports about a crackdown on margin lending in China, while the dollar retreated on views that stronger U.S. consumer prices were not enough to offset recent weak data that could slow a Federal Reserve interest rate hike, according to Reuters.
China's securities regulator warned investors to be cautious as Chinese shares hit seven-year highs after seven weeks of gains. Retail investors are borrowing record amounts of money to buy stocks, pushing trading volumes to new highs, it said.
AllianceDBS Research in its evening edition last Friday said that led by the up close in the preceding day, the FBM KLCI had on April 17 crossed into 1,850 zone to reach a high of 1,852.95 as market participants continued to play on the buying side in anticipation of a higher market.
However, it said non-follow through buying support in the area of 1,852 prompted profit taking activity.
The research house said this pulled the benchmark index down to a low of 1,845.09 before settling near the day’s low at 1,845.86 (- 2.08, - 0.11%) ahead of weekend.
“In the broader market, gainers outnumbered losers with 493 stocks ending higher and 334 stocks finishing lower. That gave a market breadth of 1.47 indicating the bulls were in control,” it said.
AllianceDBS Research said the crossover of 1,850 on April 17was short-lived, because many market participants continued to be uncomfortable being long in the area of 1,850 after the recent market decline from 1,856 (7 Apr 2015) to 1,836 (15 Apr 2015).
It said the fall back below 1,850 was believed to be a test to gauge the availability of the selling pressure.
“A small consolidation between 1,850 and 1,837 can be expected in the coming few days.
“A crossover of 1,850 again should see the benchmark index gearing towards the resistance zone of 1856 – 1,858,” it said.
The research house said that indicator wise, the MACD was below the 9-day moving average line.
“The analysis of overall market action on April 17 revealed that buying power was weaker than selling pressure.
“As such, the FBM KLCI would likely trade below the 1,845.09 level on April 20,” said AllianceDBS Research.