Observers expecting more downside to the stock market

PETALING JAYA: Anxieties over the eurozone debt and uncertainty over the United States debt-ceiling negotiations have caused investors to be more cautious and observers are expecting more downside to the stock market.

The FBM KLCI retraced 6.94 points to 1,555.64 on volume of 977.86mil, the second consecutive day of heavy selling.

The Dow Jones Industrial Average is coming off the worst week since the one ending June 10. It fell 1.4% last week after credit-rating warnings on US debt and weaker economic data kept investor sentiment in check. It was the eighth decline in 11 weeks.

A dealer from CIMB Securities said that the FBM KLCI has triggered a short-term sell signal after breaking the 1,567-level.

“The FBM Emas Index's short-term 30-day line at 10,779 has also been broken. The next critical support level will be at the 90-day line at 1,545,” he said.

A dealer from JF Apex Securities expected the market to correct further in the next few days while trading would likely be lacklustre trading for the next few weeks.

“This is not a good sign, as it shows that the appetite for stocks is low,” said the dealer.

He said there was no catalyst in the short-term. With Malaysia being a political market, and speculations that the general election would not be held anytime soon, there was nothing for investors to look forward to. “Externally we have bad news from the European front. In the past, we had our internal flow of good news and the general election to sustain our market.

“Right now, with both internal and external news painting bleak pictures, there isn't much hope for the stocks to rise.

“For those who are still holding stocks, it is now panic selling. My advice is to hold and do nothing for the time being. For those who are holding on to cash, don't buy yet,” he said.