KUALA LUMPUR (Jan 8): The FBM KLCI is seen ending the first week in January 2016 on a weaker note today as sellers remain in control in what has been a volatile period at most global markets rattled by China's state of the economy.
Furthermore, the World Bank painted a gloomy outlook for the global economic growth this year and sees the Malaysian economic growth slowing to 4.5% in 2016.
Shares on major exchanges fell for a sixth straight day on Thursday and crude oil prices touched multi-year lows as investors fretted over the state of China's economy and its ability to stabilise its stock market, according to Reuters.
In a move that deepened concerns over China's economic health, the People's Bank of China set the yuan midpoint rate lower for an eighth consecutive day. The 0.5% decline was the biggest between daily fixings since August, it said.
AllianceDBS Research in its evening edition Thursday said despite the up close in the preceding day, the FBM KLCI had on Jan 7 opened on a weak note as market participants chose to play a cautious game in anticipation of a lower market.
It said under the persistent selling pressure, the benchmark index was in the red throughout most of the trading sessions before settling at the day's low of 1,655.13 (down 12.84 points or 0.77%).
"In the broader market, losers outnumbered gainers with 721 stocks ending lower and 253 stocks finishing higher. That gave a market breadth of 0.35 indicating the bears were in control," it said.
AllianceDBS Research said the FBM KLCI was supposed to see a follow through buying attempt to trade higher on Jan 7, but the benchmark index could only reach a high of 1,669.79 before turning lower.
"The lower high showed the reluctance of market participants to make a stronger commitment on the buying side.
"A preliminary check of the market situation seemed to be pointing to the fear of market unsustainability after the sell-off with a downside gap on Jan 4.
"Following the weak down close on Jan 7, the market should come under pressure to trade lower again 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 that indicator wise the MACD was still above the nine-day moving average line.
"The analysis of overall market action on Jan 7 revealed that buying power was weaker than selling pressure.
"As such, the FBM KLCI would likely trade below the 1,655.13 level on Jan 8," said AllianceDBS Research.
Based on corporate announcements and news flow yesterday, companies that may be in focus today could include the following: Telekom Malaysia Bhd, Instacom Group Bhd, Petronas Gas Bhd, Malayan Banking Bhd, Ideal Sun City Holdings Bhd, Esthetics international Group Bhd and Gamuda 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.)