GENERALLY bearish investor sentiment elsewhere in Asia spilled over into the Kuala Lumpur stock market yesterday, pulling the KLSE Composite Index (CI) a further 10 points or 1.3% down to 782.
Similarly, the Hong Kong, Australian, Singapore and Taiwan markets all finished lower, falling in tandem with Tokyo, where the Nikkei 225 plunged 380 points or 3.7% to 9.787.
The KLSE's benchmark index began to slide right from the opening bell, falling to an intra-day low of 780 before clawing back two points towards the close.
Losers outnumbered gainers by more than 10 to one, while volume for the day came to 590 million shares valued at RM1.1bil.
After hitting 817 at the end of October, the CI has now fallen back to a level slightly below that of a month ago.
KLSC Asset Management chief investment officer Connie Ong said the local market was affected by the sharp pullback elsewhere in the region, especially Tokyo. Many in Tokyo believed that a reported warning by the Al-Qaeda that it would launch further attacks against the US as well as its allies, including Japan, was a major factor behind the Nikkei's slide yesterday.
Ong said investors were also concerned about the stronger yen and its effect on Japan's continued recovery, as well as any perceived weakness in the US economy, both of which would have ramifications on regional exports.
She believes, however, that the pullback in the region's markets is temporary, barring the emergence of weaker key statistics from the US.
MIDF Sisma Securities head of research Roszila Omar agreed that last Saturday's bombing of two synagogues in Istanbul had little to do with skittish investor sentiment in the KLSE, saying that investors had squared off positions ahead of the long weekend.
MIDF Sisma believes the market will trade range-bound for the rest of this week. A major factor for the market post-Hari Raya, Roszila said, would be October's trade figures, particularly the export numbers.
Chartist K.M. LEE reports that the local bourse continued to retreat from its recent peak of 818.57 on extended profit-taking yesterday with the CI carving out a short-term downtrend channel.
Technical indicators remained weak. The daily moving average convergence/divergence retained its sell mode, trending sharply below the daily signal-line to stay bearish, but the daily slow-stochastics momentum index, with a reading under 10, is grossly oversold.
Despite the sharp pullback, the outlook for the KL stock market is still relatively positive in the longer term as the CI has not violated its 7-month up-sloping trend line at the 765-point level.
Based on the daily bar chart and in view of the oversold condition, investors can expect the KLSE to stage a technical rebound anytime now. Current support and resistance are seen at 776 and 800 points.
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