KLCI to remain weak in line with global equities rout

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KUALA LUMPUR (July 28): The FBM KLCI is expected to remain weak and consolidate further today in line with the overnight rout at global markets on renewed worries over slowing growth in China, as well as the absence of any tangible fresh catalyst to drive the local market.

The biggest rout in Chinese shares in eight years stoked concerns over slowing growth in the world's No. 2 economy on Monday, knocking down global equities and the prices of key commodities, according to Reuters.

The dollar eased on safety bidding for other major currencies and the euro topped $1.11 for the first time in two weeks, supported by strong German business sentiment data, it said.

Wall Street ended down on the worries over China's slowing growth, crystallized by a stunning 8.5 percent fall in Shanghai shares that also rattled equity markets in Europe and Asia, said Reuters.

AllianceDBS Research in its evening edition Monday said the FBM KLCI had on July 27 opened the day on a negative note as market participants chose to play on the selling side in anticipation of a lower market.

The research house said that in the absence of stronger buying interest, the benchmark index was in the red throughout the trading sessions before settling at the day’s low of 1,709.76 (- 11.00 , - 0.64%).

“In the broader market, losers outnumbered gainers with 609 stocks ending lower and 290 stocks finishing higher. That gave a market breadth of 0.47 indicating the bears were in control,” it said.

AllianceDBS Research said the lower low on July 27 was a little surprise, because the ability of the benchmark index to climb back up with a settlement at 1,720.76 on July 24 indicated the availability of certain supportive buying power.

“The lower high followed by the lower low on July 27 suggested a stronger desire to play a selling game.

“Given the weak market down close at 1,709.76 after staying above 1,720 for 8 consecutive days, we should thus see a lower market again with immediate support at 1,706.

“The overhead resistance is at 1,720,” it said.

The research house said that indicator wise, the MACD was still marginally above the 9-day moving average line.

“The analysis of overall market action on July 27 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,709.76 level on July 28,” said AllianceDBS Research.