Bargain hunting to help lift KLCI

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KUALA LUMPUR (Dec 8): The FBM KLCI is likely to trend upward today, lifted by bargain hunting in line with last Friday’s gains at most regional markets as some buying interest is expected to return at the oversold local market.

An unusually strong U.S. jobs report lifted the dollar to a five-and-a-half-year high against a basket of currencies on Friday and drove stocks higher, led by financial shares, according to Reuters.

U.S. bond prices dropped, pushing short-term yields to their biggest single-day rises in nearly four years as investors priced in a U.S. interest rate hike by mid-2015, it said.

The Dow and S&P 500 closed a seventh straight weekly advance on Friday as a better-than-expected jobs report indicated strong economic growth, but perhaps to the point where interest rates could rise sooner than previously anticipated, said Reuters.

AllianceDBS Research in its evening edition last Friday said that dampened by the weak down close in the preceding day, the FBM KLCI had on Dec 5 traded lower again to reach a low of 1,740.56 after the opening bell as some market participants continued to play on the selling side in anticipation of a lower market.

However, it said non-follow through selling pressure in the area of 1,740.56 attracted bargain hunting interest, and that this lifted the benchmark index to a high of 1,755.91 before settling at 1,749.37 (+3.68, +0.21%).

The research house said that in the broader market, gainers outnumbered losers with 459 stocks ending higher and 330 stocks finishing lower.

That gave a market breadth of 1.39 indicating the bulls were in control, it said.

AllianceDBS Research said the benchmark index lost 105 points or 5.69% in 7 days measuring from the high of 1,845 (27 Nov 2014) to the low of 1,740 (5 Dec 2014).

“However, the lower low followed by a up close on Dec 5 seemed to be indicating that a technical rebound is around the corner.

“Because the interaction among the market participants showed that there was a stronger desire to buy stocks in expectation of a certain amount of recovery after the recent mini market crashes,” it said.

It said given the up close, the benchmark index should thus be on its way to test the next resistance at 1,769 – 1,780.

Indicator wise, the MACD is still below the 9-day moving average line, it said.

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

“As such, the FBM KLCI would likely trade above the 1,755.91 level on Dec 8,” said AllianceDBS Research.