Uptrend stalls on rising Middle East tensions and profit taking by foreigners

Technical pick –PMETAL

KLCI: 1660.09 (-11.2)
DOW: 42313 (137.9)
MSCI Asia: 197.33 (3.1)
FCPO (RM): 4051 (-101)
BRENT (USD): 71.98 (0.38)
USDMYR: 4.1255 (-0.02)
SGDMYR: 3.2167 (-0.006)
EURMYR: 4.6039 (-0.016)
AUDMYR: 2.8415 (-0.006)
GBPMYR: 5.5214 (-0.016)
US: 10-yr yield (%) 3.7506 (-0.046)
BNM:10-yr yield (%) 3.71 (-0.01)

Asia/US. Asian markets soared, led by rallies in the Nikkei 225 (+2.32%) and SHCOMP (+2.88%), boosted by slower core inflation in Japan (-0.4% to 2% in Sep) and China’s Politburo pledged more fiscal support for the economy while PBOC cut the RRR and ST rates to achieve its growth targets of 5%. The Dow climbed to a fresh record on Friday (+138 pts to 42,313) as the Aug PCE index showed continued signs of easing while the US consumer spending grew at a slower than anticipated pace in Aug. This week, key events to focus are Powell’s speech, JOLTS data, ISM manufacturing (Oct 1), ISM services (Oct 3) and nonfarm payrolls (Oct 4). 

Malaysia. Contrary to the higher Wall St and regional markets, KLCI slid 11.2 pts to 1,660.1 amid continued liquidation (locked in currency and equity gains) by foreigners for a 5th consecutive session, snapping its 5th straight weekly net inflows. Market breadth deteriorated to 0.7 vs 0.9 previously while daily volume eased 3.5% to 3.02bn shares valued at RM2.68bn (-5.3% DoD). Foreign institutions continued their net selling (-RM100m, weekly: -RM527m, Sep: +RM781m) while local retailers (+RM63m, weekly: +RM286m, Sep: -RM83m) and local institutions (+RM37m, weekly: +RM241m, Sep: -RM678m) 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 measures, 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 major resistance levels at 1,684 to 1,700. However, the relief rally from 1,529 (Black Monday on Aug 5) may stall (support: 1,638-1,647-1,663) as investors weigh continued profit taking liquidation by foreigners (potential rotation to China/HK markets following its huge stimulus), more insights from the upcoming Budget 2025 and rising geopolitical tensions in Middle East.

Technically, PMETAL is poised to cross above immediate hurdle at RM5.10 (200D MA) following downtrend resistance breakout last Friday. A successful breakout above this barrier will lift the stock towards RM5.23 (50% FR) and RM5.43 (61.8% FR) next. On the downside, major supports are situated at RM4.88 (10D MA) and 4.78 (23.6% FR) range. 

Source: Hong Leong Investment Bank Research - 30 Sept 2024