RM strength and Iskandar theme may sustain upside towards 1,684-1,700 levels

Technical pick: KSENG

KLCI: 1668.82 (3.2)
DOW: 42063.36 (38.2)
MSCI Asia: 186.48 (1)
FCPO (RM): 3947 (71)
BRENT (USD): 74.49 (-0.39)
USDMYR: 4.2037 (-0.003)
SGDMYR: 3.2533 (-0.007)
EURMYR: 4.6916 (-0.01)
AUDMYR: 2.8613 (-0.015)
GBPMYR: 5.5883 (0.001)
US: 10-yr yield (%) 3.7413 (0.028)
BNM:10-yr yield (%) 3.738 (0.011)

Asia/US. Asian markets closed mostly higher after the Fed’s jumbo cut in interest rates (-50bps to 4.75-5.00%) and signalled potential cumulative of 50bps cuts in Nov and Dec 24 meetings, followed by more easing of -100bps in 2025 and -50bps in 2026, aiming for a terminal rate of 2.9%. Meanwhile, Nikkei 225 trimmed early gains after the BOJ held rates steady but flagged expectations for a steady hike in CPI after its core inflation rate accelerated by 0.1% to 2.8% in Aug. The Dow rose 38 pts (from -160 pts intraday) to 42,063 (+669 pts WoW), fuelled by the Fed's outsized interest rate cut. Last week, economic readings appeared aligned with expectations for a soft landing. This week, focus will be the preliminary S&P Global’s Sep manufacturing and services PMIs before shifting to Friday’s personal spending, personal income, and PCE deflator.

Malaysia. Tracking higher Wall St and regional markets, KLCI gained 3.1 pts at 1,668.8 (+16.6 pts WoW), rejuvenated by RM strength coupled with the Johor investment theme (Forest City SFZ announcement and upcoming Invest Malaysia on 26 Sep in Sunway Iskandar). Market breadth remained positive at 1.56 vs 2.79 previously while daily volume rose 5% to 4.19bn shares valued at RM5.97bn (+46%). Foreign institutions emerged as major buyers (+RM57m, WoW: +RM272m, Sep: +RM1.29bn) while local retailers (-RM45m, WoW: -RM310m, Sep: -RM369m) and local institutions (-RM12m, Wow: +RM38m, Sep: -RM919m) were notable net sellers.

Outlook Mirroring upbeat sentiment on Fed’s pivot and US soft landing narrative alongside RM strength and Invest Malaysia event on Sep 26, KLCI may sustain its uptrend towards short term resistances at 1,684-1,700 levels (support: 1,638-1,655). However, further rally will depend on insights from 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, KSENG is poised to stage a downtrend line breakout after closing firmly above multiple MAs. A successful breakout above RM5.95-RM6.00 barriers could witness further advance to RM6.11 (61.8% FR), RM6.22 (76.4% FR) and RM6.40 levels, while downside supports are pegged at RM5.63 (Sep 9 low) and RM5.73 (lower BB) zones. 
 

Source: Hong Leong Investment Bank Research - 23 Sept 2024