KUALA LUMPUR (Aug 21): The FBM KLCI is expected to face more headwinds on the back of the overnight slump at most global markets.

However, the oversold stocks at the local market may present some bargain hunting opportunities for investors.

World stock markets tumbled and Brent oil prices remained under pressure on Thursday as another slump in the equity market of China, the world's No. 2 economy, stoked concerns about sluggish global growth, according to Reuters.

Wall Street was also weighed down by a drop in finance stocks and fell for a third straight session as expectations cooled for a U.S. interest rate hike in September, which also kept the dollar lower, it said.

AllianceDBS Research in its evening edition Thursday said that dampened by the day’s low settlement in the preceding day, the FBM KLCI had on August 20 gapped down to reach a low of 1,562.11 as market participants continued to play on the selling side in anticipation of a lower market.

The research house said under the stronger selling pressure, the benchmark index was in the red throughout the trading sessions before rebounding to settle near the day’s high at 1,577.41 (- 5.03 , - 0.32%).

“In the broader market, losers outnumbered gainers with 448 stocks ending lower and 360 stocks finishing higher. That gave a market breadth of 0.80 indicating the bears were in better control,” it said.

AllianceDBS Research said the downside gap indicated the urgency to liquidate stock positions.

The research house however said the inability of the benchmark index to fall below the 1,562 level attracted some risk buying interest which pulled the market back up into the 1,570 zone.

“Given the way this market carried itself over the past 3 days, the benchmark index is likely to trade between 1,560 and 1,600 in an attempt to equalize the imbalance buying and selling forces created in recent days.

“A breakout of the range should dictate the next immediate market direction. A crossover of 1,600 should see a test of next resistance zone, 1,600 – 1,625.

“Conversely, a fall below 1,560 could send the market down to the subsequent support zone, 1,500 – 1,520,” it said.

The research house said indicator wise, the MACD was below the 9-day moving average line.

“The analysis of overall market action on August 20 revealed that buying power was stronger than selling pressure.

“As such, the FBM KLCI would likely trade above the 1,579.66 level on August 21,” said AllianceDBS Research.