KLCI may stall near YTD high 1,684 before the Fed’s verdict

Technical pick – MSM 

KLCI: 1664.28 (12.1)
DOW: 41606.18 (-15.9)
MSCI Asia: 183.19 (-0.5)
FCPO (RM): 3767 (31)
BRENT (USD): 73.7 (0.95)
USDMYR: 4.259 (-0.042)
SGDMYR: 3.2933 (-0.027)
EURMYR: 4.7437 (-0.03)
AUDMYR: 2.8801 (-0.018)
GBPMYR: 5.6306 (-0.028)
US: 10-yr yield (%) 3.6456 (0.028)
BNM:10-yr yield (%) 3.723 (-0.022)

Asia/US. Prior to the Fed’s decision (Sep 19), most Asian markets edged higher on bets of 50 bps cut by the Fed while the Nikkei 225 slid 1% on Yen strength before the BOJ’s rate decision (Sep 20). The Dow jumped as much as 213 pts to 41,835 (intraday fresh new high) before easing 6 pts at 41,606 ahead of the long-anticipated 1st rate cut since 2020, as uncertainty mounted about the size of the cut. On economic front, the US retail sales rose 0.1% in Aug against expectations of a 0.1% decline. Other key economic readings data on tap this week are housing starts and existing home sales (Sep 19).

Malaysia. After a healthy profit taking pullback from 44M high of 1,684 (3 Sep) to intraday low at 1,638 (13 Sep), KLCI staged a 2nd consecutive day of rebound (+12.1 pts to 1,664.3) amid the long-anticipated Fed easing cycle and RM strength. Market breadth turned positive for a 3rd day albeit lower at 1.52 vs 2.14 last Friday while daily volume rose 12.3% to 3.19bn shares valued at RM3.35bn, led by a broad-based rebound in the small/midcap and ACE counters. On fund flows, foreign institutions continued their net buying (+RM168m, Sep: +RM1.18bn, YTD: +RM4.22bn) alongside local institutions (+RM6m, Sep: -RM951m, YTD: +RM815m) while local retailers (-RM221m, Sep: -RM233m, YTD: -RM5.04bn) emerged as major net sellers.

Outlook Ahead of the key central banks’ policy meetings this week, KLCI could trade range bound (support: 1,638-1,655; resistance: 1,684-1,691) due to the lack of meaningful local rerating catalysts. Meanwhile, the FBMSCAP (-14.3% from 52W high) and FBM ACE (-15.6% from 52W high) indices, which have suffered sharp profit-taking corrections, should begin to attract bargain hunters for potential technical rebound. 

Technically, MSM has formed a sound base near RM0.91-1.03 zones to close at RM1.11. A successful breakout above RM1.21 (20D MA) will spur greater upside towards RM1.37 (30D MA) and RM1.52 (upper BB) levels.

Source: Hong Leong Investment Bank Research - 18 Sept 2024