Malaysian equities seen lower after overnight global rout

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KUALA LUMPUR (Jan 6): The FBM KLCI is likely to open weaker today after the overnight rout at most global markets and the seemingly lack of fresh catalysts at the local market.

Equity markets worldwide tumbled on Monday, led by commodity-linked shares as oil prices fell to 5-1/2-year lows and investors fled to the safety of government bonds, according to Reuters.

Both the Dow and S&P 500 suffered their biggest one-day declines in about three months, and all 10 S&P 500 sectors fell, it said.

AllianceDBS Research in its evening edition Monday saidthat dampened by the down close on the first market day of 2015, the FBM KLCI had on Jan 5 traded lower to 1,734.51 as market participants continued to play on the selling side in anticipation of a lower market.

It said that under the greater selling pressure, the benchmark index kept its position near the low end throughout the trading sessions before settling near the day’s low at 1,736.62 (- 16.15 , - 0.92%).

“In the broader market, losers outnumbered gainers with 502 stocks ending lower and 271 stocks finishing higher. That gave a market breadth of 0.53x indicating the bears were in control,” it said.

AllianceDBS Research said that having registered a series of up closes for 8 consecutive days (17 Dec – 29 Dec 2014), the benchmark index reversed its position to close on a weak note in the subsequent market days (30 Dec 2014 – 5 Jan 2015).

It said given the higher high followed by lower low pattern on Jan 5, sellers were evidently in control of the game play.

It said the immediate support was seen at 1,730.

The research house said a fall below 1,730 should see the market making attempts to fill the upside gap (1,720) left behind on 22 Dec 2014.

“The overhead resistance zone is pegged between 1,765 and 1,771. Indicator wise, the MACD is still above the 9-day moving average line.

“The analysis of overall market action on Jan 5 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,734.51 level on Jan 6,”it said.