PETALING JAYA: The uncertainty of the past three weeks will continue to plague global equity markets despite speculation that the US Federal Reserve may make a decision on a third round of stimulus at a summit of central bankers from around the world in Jackson Hole, Wyoming, later this week.
Barclays plc analysts said 10-year Treasury yields indicated traders had priced in US$500bil to US$600bil of bond purchases while a Citigroup Increport said current rates could only be justified by more central bank bond-buying or assuming the US economy would shrink by 2%.
Asian markets fell for a third day with the FBM KLCI down 0.8% at 1,472.16. European markets, which opened lower, were up at press time while US index futures also rose.
Analysts continue to advise caution as weak economic data and eurozone troubles impact investor confidence. Spot gold advanced US$35.72 to US$1,887.85 per ounce at 5pm, Nymex crude oil added 28 cents to US$82.54 per barrel and crude palm oil for November delivery gained RM17 to RM3,020 per tonne.
They also pointed out that the local bourse was headed for more downside risk ahead of the Aidil Fitri holidays.
HwangDBS Vickers Research Sdn Bhd analyst Goh Yin Foo said in a report that the situation remained vulnerable as investors were facing a confidence crisis.
“Until they are able to climb over the wall of worries by changing their perceptions on the stalling global economic recovery and the European sovereign debt troubles investors will be in the mood to sell rather than buy shares,” he said.
Goh said against the wobbly backdrop, the inclination to sell stocks would gather space as the holiday-shortened trading period approached next week with investors focusing primarily on any nasty earnings surprises by companies which would be rushing to announce their April-to-June quarterly report cards by next Monday.
HLIB Research head of research Low Yee Huap reiterated the house's cautious stance in another report.
“Indicators are weak, implying the local bourse may drift lower in quiet trading ahead of the long holidays next week. As such, we only advocate investors to stay defensive or sidelines,” he said.
Low said alternatively, risk-takers could adopt a short-term trading-oriented approach to buy on sharp falls in share prices and sell into any rebound.
He indicated that immediate resistance levels were at 1,500 to 1,530 with key support levels at 1,470 and 1,466. “A breakdown below 1,466 will trigger more downside risks towards 1,423 to 1,443 zones,” Low said.