KLCI to trend lower as sentiment turns weaker

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KUALA LUMPUR (Aug 5): The FBM KLCI is expected to trend lower today in line with the retreat at global markets, as buying sentiment at the local market turned negative.

The US dollar rose on Tuesday, while stocks and Treasuries prices fell after comments from a top Federal Reserve official brought forward market expectations of an interest rate increase, according to Reuters.

Oil prices edged higher despite the stronger greenback,  bouncing back from Monday's rout, it said.

AllianceDBS Research in its evening edition Tuesday said despite the “strong” up close in the preceding day, the FBM KLCI had on August 4 opened the day on a weak note to form an inside day bar as market participants chose to play on the selling side.

The research house said in the absence of stronger supportive buying interest, the benchmark index kept its position near the low end throughout the trading sessions before settling near the day’s low at 1,723.23 (-20.46 , -1.17%).

“In the broader market, losers outnumbered gainers with 549 stocks ending lower and 260 stocks finishing higher. That gave a market breadth of 0.47 indicating the bears were in control,” it said.

AllianceDBS Research said the inside day bar indicated a breather in game play.

The research house said market participants were not convinced of the underlying market strength as the day’s high close on August 3 only occurred towards the end of the trading day, via buying of selective blue chips.

“Given the fall back below the 1,739 level on August 4, the benchmark index is likely to stay between 1,714 and 1,739 in the coming few days with both buyers and sellers expected to exchange their stock positions until a breakout occurs.

“A fall below 1,714 would put pressure on the market down to the subsequent support at 1,706,” it said.

The research house said conversely, a rise above 1,739 should see a test of next hurdle at 1,744, adding that indicator wise, the MACD was still above the 9-day moving average line.

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

“As such, the FBM KLCI would likely trade below the 1,722.91 level on August 5,” said AllianceDBS Research.