KLCI likely to consolidate further in line with global equities

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KUALA LUMPUR (Jan 7): The FBM KLCI is likely to extend its losses today, in line with the slump at most global markets and as U.S. stocks fell for a fifth session on Tuesday.

Stock prices fell on global markets on Tuesday, stuck in a dismal start to 2015 on tumbling oil prices and Greece possibly leaving the euro zone, as nervous investors bought more gold, yen, low-risk government bonds and other safe-haven assets, according to Reuters.

The oil market rout that began in mid-2014 has continued, with Brent crude futures falling to near 5-1/2-year lows of $51 a barrel. This intensified concerns about how the dramatic price drop, due to sluggish global growth and a supply glut, will hurt earnings of oil companies and exacerbate disinflationary pressure worldwide, it said.

AllianceDBS Research in its evening edition Tuesday said the FBM KLCI had on Jan 6 gapped down on opening bell to reach a low of 1,708.78 as market participants continued to play on the selling side in anticipation of a lower market.

It said that under the stronger selling interest, the benchmark index held its position near the low end throughout most of the trading sessions before settling at 1,716.58 (- 20.04, - 1.15%).

“In the broader market, losers outnumbered gainers with 638 stocks ending and 180 stocks finishing higher. That gave a market breadth of 0.282 indicating the bears were in control,” it said.

AllianceDBS Research said  the benchmark was in the red again on Jan 6.

It said the downside gap indicated the urgency to unload stock positions.

“Selling supply was overwhelming. Given the weak down close, the market is expected to come under pressure to trade lower again in the coming few days with immediate support seen at 1,700,” it said.

The research house said a fall below 1,700 could see a test of the recent low of 1,671 registered on Dec 17, 2014.

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

“The analysis of overall market action on Jan 6 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,708.78 level on Jan 7,” said AllianceDBS Research.