KLCI struggles to stay above 1,600 level

KLCI struggles to stay above 1,600 level

KUALA LUMPUR: The FBM KLCI was put on a roller-coaster ride yesterday after the overnight big equity rout in the US on Wednesday as rising concern over the global economy haunted the equity markets again.

The benchmark index dived to a low of 1,581.26 points, but managed to regain all lost ground to close at 1,600.29 points yesterday.

The late bargain hunting among the 30 component stocks lent some support to the KLCI. However, there was not much buying interest in the broader market as reflected by the 118.69-point drop in the FBM Small Cap Index, which closed at 12,937 points — the lowest since Aug 6.

Trading volume was thin and remained below the two billion mark, at 1.94 billion shares worth RM1.85 billion, indicating the current cautious sentiment.

Malacca Securities Sdn Bhd opined that even with the US delaying further tariffs on China-made goods, investors will remain guarded as the trade squabble shows no signs of easing and the issue could remain long-drawn.

“Malaysian stocks are unlikely to find much solace as the broad market sentiments are staying cautious, due in part to the ongoing threats to the global economic environment and the still unresolved trade spat between the US and China that is likely to keep sentiments in check for longer.

“This is set to send the key index below the 1,600 level once again. The supports are now at the 1,590 and 1,580 levels, while the resistances are at 1,610 and 1,620 respectively,” it wrote in a note to clients yesterday.

Hong Leong Investment Bank (HLIB) said given the inverted yield curve signal, it opines that the selling pressure is likely to spill over towards stocks on the local market, especially banking stocks, and the KLCI could revisit the immediate support around 1,572.

“Nevertheless, traders may look into short-term opportunities within internal catalysts such as the ECRL (East Coast Rail Link) or immigration tenders over the near term,” HLIB research analyst Loui Low Ley Yee said in the note.

MIDF Research head of research Mohd Redza Abdul Rahman said in times of economic uncertainty, investors can look out for stocks with resilient and defensive earnings, especially those with strong domestic earnings streams.

“[Things such as] concession assets or consumer staples, something we consume regardless of the economic situation [would be good],” he told The Edge Financial Daily over the phone.

Other stocks to look at include companies with overseas earnings streams in a defensive sector, which would benefit from a weak ringgit and able to efficiently manage costs, he said.

“Stocks with strong capacity and consistent dividends — such stocks, especially when they are oversold, would be a great addition to one’s portfolio,” added Mohd Redza.

On the outlook for KLCI, he said the index’s movement will be affected by heavyweights such as banking stocks and its susceptibility to macroeconomic and geopolitical developments.

He added that the performance of crude palm oil prices will affect plantation stocks, while oil prices will affect oil and gas components such as Petronas.

“So far, we have yet to change our 1,720 year-end target, the pending outcome of the ongoing results season, but should results of key KLCI components come below expectations, we might downgrade the target,” he said.

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