Expect Stiff Hurdles at 1,589-1,600-1,613 Levels Amid Tariffs’ Woes and Upcoming Feb Results Season

Technical Stkpick: WCT

KLCI: 1574.51 (10)
DOW: 44873.28 (317.2)
MSCI Asia: 184.22 (1.6)
FCPO (RM): 4317 (-17)
BRENT (USD): 74.61 (-1.59)
USDMYR: 4.423 (-0.022)
SGDMYR: 3.2765 (-0.001)
EURMYR: 4.6015 (0.006)
AUDMYR: 2.777 (0.019)
GBPMYR: 5.5365 (0.015)
US: 10-yr yield (%) 4.4181 (-0.092)
BNM:10-yr yield (%) 3.781 (-0.009)

Asia/US. Asian markets mostly gained amid optimism that the US and its counterparts have adopted a cautious approach to tariffs after Trump delayed tariffs on Canada and Mexico for a month. However, the gains were capped by lingering concerns on looming Trump’s tariffs against the EU and China’s retaliatory levies of 10-15% on US goods, coupled with slowing China composite PMI in Jan to a 4-month low. The Dow rallied 317 pts to 44,873 while the US10Y bond yield slid 9 bps to 4.42%, taking cues from hopes of softer tariffs’ stance by the Trump’s administration and the prospect of future rate cuts in 2H after a slew of soft economic data. Sentiment was also boosted by a rebound in NVDA (+5.3%), driven by SMCI's (+8%) announcement of full production for its AI data center using its Blackwell platform while AMGN jumped 6.5% amid upbeat earnings. On earnings front, QCOM and FORD earnings topped estimates but prices fell after hours. For the rest of the week, attention will turn to NF payrolls data, as well as major earnings results due from AMZN, MRK, DIS and HON. 

Malaysia. Tracking higher regional markets and stronger RM (vs USD), KLCI soared 10.0 pts to 1,574.5, as sentiment was boosted by gains in construction and DC-related heavyweights. Market breadth improved to 1.80 vs 1.31 previously while trading volume rose 28% to 2.86bn shares valued at RM2.32bn. Foreign net outflows continued for the 23rd day (-RM65m, Feb: -RM235m, Jan: -RM3.13bn) alongside local retailers (-RM21m, Feb: +RM28m, Jan: +RM1.21bn) while local institutions (+RM86m, Feb: +RM207m, Jan: +RM1.92bn) emerged as major net buyers.

Technical view KLCI’s ongoing oversold rebound may continue after hitting the downtrend line near 1,545, supported by the bottoming up technical readings and resumed buying interest after the CNY holidays. A confirmed breakout above 1,589 (61.8% FR) will lift the index towards the 1,600 and 1,613 (200D MA) zones. On the contrary, a breakdown below 1,566 (76.4% FR) and 1,545 support levels may drag the index near 1,529 (Aug 6 low).

Despite ongoing oversold rebound, KLCI may continue to face choppy waters ahead (support: 1,530-1,545; resistance: 1,589-1,600-1,613) as we brace for: (i) global trade tensions following US tariffs; (ii) China’s economic challenges; (iii) upcoming Feb results season; and (iv) persistent foreign funds outflow. 

Technically, WCT (CP: 0.87, BUY, TP: RM1.44) is poised for further recovery, having established a base at RM0.78 above the support trend line, coupled with bottoming up technical readings. A confirmed breakout above RM0.915 (50D MA) could propel the stock towards RM1.00-RM1.13 (61.8% FR) levels while major support levels are situated near RM0.78 (lower BB) and RM0.80 zones.  

Source: Hong Leong Investment Bank Research - 6 Feb 2025