KLCI set for cautious start, profit taking likely

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KUALA LUMPUR (March 5): The FBM KLCI looks set for a cautious start today in line with the  overnight slump at most global markets ahead of the ECB meeting, and may be prone to some mild profit taking.

Stock prices around the world fell on Wednesday on profit-taking, while the euro dropped to an 11-1/2-year low ahead of a European Central Bank meeting where policymakers are expected to offer details on their bond-purchase stimulus plan.

The Dow Jones industrial average and Standard & Poor's 500 retreated further from record highs set on Monday while major gauges of European and Japanese shares were below their multi-year peaks.

AllianceDBS Research in ite evening edition Wednesday said that led by the up close in the preceding day, the FBM KLCI had on March 4 traded marginally higher to 1,826.05 as some market participants chose to play on the buying side in anticipation of a higher market.

However, it said weak follow through buying in the area of 1,826.05 prompted profit taking activity.

The research house said this pushed the benchmark index down to a low of 1,819.18 before rebounding to settle near the day’s high at 1,825.54 (+4.29, +0.24%) in the last few minutes buying of selective blue chip stocks.

“In the broader market, losers outnumbered gainers with 473 stocks ending lower and 345 stocks finishing higher. That gave a market breadth of 0.72 indicating the bears were in control,” it said.

AllianceDBS Research said a higher high may have been made on March 4, but the market was seen struggling to push the benchmark index far up after the opening bell.

It said the near day’s high settlement resulted from the last few minutes buying of selective blue chip stocks showed that certain market participants were trying to keep the market on the high end in an attempt to avoid the immediate risk of falling below the 1,810 level.

The research house said a strong follow through buying in the next day (March 5) should see the benchmark index gearing towards the recent high of 1,831 (Feb 4).

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

“The analysis of overall market action on March 4 revealed that buying power was weaker than selling pressure.

“As such, the FBM KLCI would likely trade below the 1,819.18 level on March 5,” said AllianceDBS Research.