FBM KLCI

• The FBM KLCI declined 1.66% (27.05 points) to close at 1,602.41 last week, driven by investor concerns over China's sluggish economy and uncertainties surrounding U.S. trade policies. While the formalisation of the Johor-Singapore Special Economic Zone (JS-SEZ) Agreement provided some optimism, market sentiment was dampened by profit-taking, renewed foreign outflows, and worries over U.S. AI chip export restrictions. Most sectors ended the week lower, with the exception of Construction (+2.0%) and REIT (+0.3%).
• Looking ahead, the stronger-than-expected U.S. jobs report has driven bond yields higher and reduced expectations for a single Fed rate cut this year, prompting regional fund managers to reassess their portfolios, including in Malaysia. Key global events include U.S. inflation data and earnings releases from nearly 590 companies, with major banks kicking off their reports on January 15, will likely shape market sentiment. Domestically, focus will shift to Malaysia's advanced 4QCY24 GDP report on Friday, which is anticipated to exceed the 5.3% growth recorded in 3QCY24.
• Technically, last week's strong sell-off, with the market closing near its weekly low, suggests room for further consolidation. Although the index closed slightly above its critical 50-week SMA, the technical outlook appears increasingly challenging, with a higher likelihood of breaking below this level given the downward trends in stochastic and RSI indicators.
• In short, market volatility is expected to rise this week, particularly during the first half, amid continued cautious trading. However, the downward bias could moderate later in the week if Malaysia's 4QCY24 GDP demonstrates resilience. Key support levels are at 1,598 (50-week SMA), followed by 1,591 and 1,586. Resistance levels are at 1,612 (5-week SMA) and 1,630.

Source: Kenanga Research - 13 Jan 2025