KLCI to trend sideways, struggle to breach 1,700-level

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KUALA LUMPUR (Oct 29): The FBM KLCI is expected to trend sideways today but struggle to breach the 1,700-point level given the lack of fresh catalysts at the domestic market.

U.S. bond yields rose and stocks sold off after a U.S. Federal Reserve statement following its two-day policy meeting made it clear that the world's largest central bank still sees a December rate increase as a possibility, according to Reuters.

The Fed kept U.S. rates at their long-term record lows, but what stood out in the statement was a specific reference to conditions necessary "to raise the target range at its next meeting." It said it will assess progress towards maximum employment and two percent inflation, same as its September statement, but the reference to a particular meeting is rare for the Fed, it said.

AllianceDBS Research said that dampened by the down close in the preceding day, the FBM KLCI had on Oct 28 opened the day on a weak note to break below the 1,695 support.

The research house said the benchmark index subsequently reached a low of 1,684.36 and kept its position near the low end throughout the trading sessions before settling near the day’s low at 1,686.51 (down 10.44 points or 0.62%).

“In the broader market, gainers outnumbered losers with 449 stocks ending higher and 383 stocks finishing lower. That gave a market breadth of 1.17 indicating the bulls were in control,” it said.

AllianceDBS Research said the market continued to register lower low and lower high for 4 consecutive days on Oct 28 coupled with a downside breakout of 1,695 support.

“Sellers had been in better control over the buyers over the past 4 days with many market participants seen interested to lock in their winning trades in the absence of positive catalyst at this juncture.

“Given the weak down close on Oct 28, the benchmark index is likely to trade lower again with immediate support zone, 1675 - 1,680,” it said.

The research house said the overhead resistance was pegged at 1,695, adding that indicator wise, the MACD was below the 9-day moving average line.

“The analysis of overall market action on Oct 28 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,684.36 level on Oct 29,” said AllianceDBS Research.