KUALA LUMPUR (Jan 5): The FBM KLCI is expected to stay weak today in line with the overnight selloff at most global markets on the first trading day sparked by massive slide at the China stock market, and hover between the 1,650–1660 band.
However, some bargain hunting opportunities may arise at the local bourse as investors may buy into some of the battered stocks.
Global equity markets fell sharply on Monday, while gold and bonds rose, after a 7% slide in Chinese shares sparked by weak economic data rekindled worries over global growth on the first day of trading in 2016, according to Reuters.
Rising tensions in the Middle East also increased demand for safe-haven assets. Crude oil prices rose above US$38 a barrel at one point as some speculated a breakdown in diplomatic ties between Saudi Arabia and Iran could result in reduced oil supplies, it said.
AllianceDBS Research in its evening edition Monday said the FBM KLCI had on Jan 4 opened the day on a weak note with a downside gap 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 supportive buying interest, the benchmark index was in the red throughout the trading sessions before settling at the day's low of 1,653.37 points (down 39.14 points or 2.31%).
"In the broader market, losers outnumbered gainers with 708 stocks ending lower and 278 stocks finishing higher. That gave a market breadth of 0.39 indicating the bears were in control," it said.
AllianceDBS Research said the downside gap indicated the urgency to liquidate stock positions.
"Sellers were in high control of the game play with the benchmark index staying near the low end soon after the opening bell.
"The sell down on the first trading day of 2016 with a 39.14-point drop was indeed a shock as the market was earlier seen beginning to gain its pace to go upward after rising from the low of 1,630 (Dec 22, 2015) to the high of 1,706 (Dec 30, 2015).
"Given the weak down close on Jan 4, the benchmark index is expected to decline further with immediate support at 1,650," it said.
The research house said a fall below 1,650 would put pressure on the benchmark index down to the subsequent support at 1,640.
It said the overhead resistance is at 1,688, adding that indicator wise, the MACD was still above the nine-day moving average line.
"The analysis of overall market action on Jan 4 revealed that buying power was weaker than selling pressure.
"As such, the FBM KLCI would likely trade below the 1,653.37 level on Jan 5," said AllianceDBS Research.
Based on corporate announcements and news flow yesterday, companies that may be in focus today could include the following: Ikhmas Jaya Group Bhd, Econpile Holdings Bhd, Borneo Aqua Harvest Bhd, XOX Bhd, ConnectCounty Holdings Bhd, TDM Bhd, Tenaga Malaysia Bhd and IOI Properties Group Bhd.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)