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Tuesday January 22, 2013

FBM KLCI extends losses in wake of liquidation pressure

PETALING JAYA: Bursa Malaysia's 30-stock gauge, the FTSE Bursa Malaysia KL Composite Index (FBM KLCI) shed 2.43%, extending its losses in the wake of liquidation pressure. It was its single-largest daily loss since October 2011.

“It's the herd mentality kicking in; everyone is following everyone in selling,” remarked one dealer.

The market had already been on a general downtrend after enjoying a rally that started in November which saw a new peak of 1,699.68 on Jan 4. After that, profit-taking had ensued.

“The selling has become more apparent today (yesterday),” Pong Teng Siew, head of research at Inter-Pacific Securities Sdn Bhd, said when contacted.

A technical analyst said a combination of weak sentiment due to the lack of fresh catalysts and some political uncertainty, coupled with sell signals as well as a recent breakdown in the index's uptrend channel, would likely keep the market in a consolidation phase in the immediate term.

At the close, the stock market was down 40.81 points to 1,635.63, pulled down by index-linked counters such as Public Bank Bhd which ended 34 sen down to RM15.80, Felda Global Ventures Holdings Bhd which fell 15 sen to RM4.42, Axiata Group Bhd which finished 34 sen lower to RM6.30 and British American Tobacco (M) Bhd which shed 40 sen to RM59.50.

Market breadth was negative with 85 counters ending higher, 904 down while 172 traded unchanged.

The number of shares that changed hands totalled 1.83 billion valued at some RM2.6bil.

The technical analyst pegged the immediate support level at 1,624 which is the 200-day simple moving average line.

In its note on the market direction issued after the morning trading session, Kenanga Research said from a technical perspective, the sharp sell-off had resulted in the benchmark index violating multiple support levels and that it expected further selling pressure ahead.

“With the next support levels a fair distance southwards at 1,624 and 1,590, perhaps it would be a good idea to unload into strength from here,” it told its clients.

Danny Wong, chief executive officer of fund management company Areca Capital, said the firm had begun trimming its portfolio two weeks ago.

“We are not buying now but if there are stocks which have fallen way below our target price, we will start nibbling,” Wong, who helps manage more than RM500mil in funds, said.

In the commodities market, spot gold increased US$6.46 to US$1,690 per ounce while crude palm oil for third-month futures increased RM17 to RM2,417 per tonne as at press time.

The ringgit was quoted at 3.0345/0380 against the greenback compared with 3.0100/0130 on Friday.

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