Poised to Revisit 1,684-1,700 Levels Amid Fed’s Pivot, RM Strength and China’s Sweeping Stimulus

Technical Pick: AXIATA

KLCI: 1671.32 (-2.1)
DOW: 42175.11 (260.4)
MSCI Asia: 194.2 (4.6)
FCPO (RM): 4149 (-3)
BRENT (USD): 71.6 (-1.86)
USDMYR: 4.1458 (0.017)
SGDMYR: 3.2224 (0.009)
EURMYR: 4.6198 (0.002)
AUDMYR: 2.8471 (0.008)
GBPMYR: 5.5373 (0.016)
US: 10-yr yield (%) 3.7963 (0.011)
BNM:10-yr yield (%) 3.742 (0)

Asia/US. Asian markets ended higher, led by rallies in the Nikkei 225 (+2.8%) and SHCOMP (+3.6%). The bullish sentiment was buoyed by upbeat earnings report from Micron, cautious tone from BOJ’s minutes that called for vigilance to inflation risks and expectations of future rate hikes coupled with top Chinese officials’ pledge to step up fiscal and monetary policy support measures to achieve growth targets. Ahead of the Powell’s speech and upcoming PCE deflator data (Sep 27), Dow ended at fresh record high (+261 pts to 42,175), boosted by Micron’s strong earnings and outlook, triggering a wave of gains across the semiconductor sector. Sentiment was also lifted by lower weekly jobless claims, upbeat durable goods orders and the strong final 2Q24 GDP reading, easing concerns of a broader economic slowdown. 

Malaysia. Bucking the higher regional markets, KLCI eased 2.1 pts to 1,671.3 after hovering within 1,666.2 and 1,672.6 band. Market breadth was negative but improved to 0.90 from 0.50 previously while daily volume shrank 12.6% to 3.13bn shares valued at RM2.83bn. For a 4th consecutive day, foreign institutions continued their net selling (-RM87m, Sep: +RM861m, YTD: +RM3.90bn) while local retailers (+RM52m, Sep: -RM146m, YTD: -RM4.96bn) and local institutions (+RM35m, Sep: -RM715m, YTD: +RM1.05bn) emerged as the major net buyers.

Outlook In light of the Fed’s pivot and the narrative of a US soft landing, China’s sweeping stimulus packages, RM appreciation, political stability and progressive domestic reform initiatives, coupled with improved economic growth and earnings delivery, KLCI is poised to sustain its uptrend towards short-term resistance levels at 1,684 to 1,700 (support: 1,638-1,647-1,663). However, further rally will hinge on insights from the upcoming Budget 2025 (to be tabled on Oct 18), as well as additional details regarding the Johor-Singapore Special Economic Zone (JS-SEZ), expected to be finalized by the end of Nov. 

Technically, AXIATA is poised to cross above immediate hurdle at RM2.61 (200D MA) following yesterday’s downtrend resistance breakout. A successful breakout above this barrier will lift the stock towards RM2.76 (76.4% FR) and RM2.94 (52W high) next. On the downside, major supports are situated at RM2.36 (23.6% FR) and 2.44 (50D MA) range. 

Source: Hong Leong Investment Bank Research - 27 Sept 2024