Profit taking pullback may temporarily limit upside at 1,684-1,700 barriers

Technical pick: PANDA

KLCI: 1660.59 (-3.7)
DOW: 41503.1 (-103.1)
MSCI Asia: 182.98 (-0.2)
FCPO (RM): 3867 (22)
BRENT (USD): 73.65 (-0.05)
USDMYR: 4.2435 (-0.016)
SGDMYR: 3.2809 (-0.012)
EURMYR: 4.726 (-0.018)
AUDMYR: 2.8791 (-0.001)
GBPMYR: 5.612 (-0.019)
US: 10-yr yield (%) 3.7038 (0.058)
BNM:10-yr yield (%) 3.723 (-0.022)

Asia/US. Asian markets posted small gains before the Fed’s verdict this morning, as traders were divided on whether the US central bank will announce a cut of 25 bps (40% odds) or a 50 bps (60% chance). The Dow rallied as much as 376 pts to 41,982 (a new record high) before losing 103 pts at 41,503 in a volatile session as investors sell the news after the Fed delivered a jumbo size 50 bps cut (the 1st since Mar 2020). During the press conference, Powell highlighted the resilience of the US economy and indicated that the FOMC is not in a hurry to further loosen monetary policy. Overall, projections by FOMC members pointed to a median of 100bps in total rate cuts for 2024, translating to 25bps in each at both the Nov 7 and Dec 18 FOMC meetings.

Malaysia. Ahead of the major Fed’s verdict, KLCI slid as much as 10.3 pts before paring its losses to 3.7 pts at 1,660. Market breadth turned negative at 0.84 vs 1.52 a day ago while daily volume slid 28% to 2.30bn shares valued at RM2.75bn. On fund flows, foreign institutions emerged as notable sellers (-RM76m, Sep: +RM1.10bn, YTD: +RM4.15bn) alongside local retailers (-RM16m, Sep: -RM249m, YTD: -RM5.06bn) while local institutions (+RM92m, Sep: -RM859m, YTD: +RM907m) were major net buyers.

Outlook After surging 206 pts YTD, KLCI could trade range bound in the short term (support: 1,638-1,655; resistance: 1,684-1,700) as investors weigh the Fed’s sizeable 50 bps cut while assuming a soft-landing outcome for the US economy. Additionally, market is awaiting further insights on the upcoming Budget 2025 (to be tabled on Oct 18), which aims to drive growth with fiscal stability, strong progressive policies, reforms, and effective execution.

Technically, PANDA (FIG#3) has established a sound footing near RM0.27-0.29 zones A successful breakout above RM0.325 (20D MA) will spur greater upside towards 0.35 (23.6% FR) and 0.39 (50D MA) levels.

Virtual portfolio We took profits on CAPITALA (2% gain), SMRT (0.9% gain) and SIMEPROP (8.1% GAIN) yesterday.

Source: Hong Leong Investment Bank Research - 19 Sept 2024