KLCI set to extend gains cautiously

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KUALA LUMPUR (April 21): The FBM KLCI is expected to extend its gains albeit cautiously today in line with the overnight rebound at most global markets.

Equity markets rebounded on Monday after China took steps to stimulate its economy and Wall Street also rose on corporate earnings, while the euro weakened further on worries about Greece, according to Reuters.

The Chinese central bank on Sunday cut the amount of cash banks must hold as reserves in its latest attempt to spur lending and combat a slowing economy. The news followed reports last week about a crackdown on margin lending there, which had sent global equity markets lower on Friday, it said.

AllianceDBS Research in its evening edition Monday said that dampened by the down close on last Friday, the FBM KLCI had on April 20 traded lower to 1,841.10 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 kept its position near the low end throughout most of the trading sessions before rebounding to settle near the day’s high at 1,848.66 (+2.80 , +0.15%) in the last few minutes buying of selective blue chip stocks..

“In the broader market, losers outnumbered gainers with 485 stocks ending lower and 346 stocks finishing higher. That gave a market breadth of 0.71 indicating the bears were in control,” it said.

AllianceDBS Research said the last few minutes buying of selective blue chip stocks to settle the market near the day’s high on April 20 showed the unwillingness of certain market participants to see a weak close for fear of a change in market sentiment.

It said given what happened in the last 4 market days, the benchmark index was likely to be trading between 1,836 and 1,853 in the coming few days.

The research house said a fall below 1,836 would put pressure on the market down to the subsequent support zone, 1,826 – 1,830.

However, it said a crossover of 1,853 could see the market gearing towards the next overhead resistance at 1,858.

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

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

“As such, the FBM KLCI would likely trade above the 1,848.97 level on April 21,” said AllianceDBS Research.