FBM KLCI

• The FBM KLCI declined 1.07% (16.81 points) to close at 1,556.92 last Friday, pressured by concerns over DeepSeek's impact on AI investments and continued foreign outflows. Most sectors ended lower, with Utilities, Construction, and Technology declining over 3%, while REIT and Transportation posted marginal gains of less than 0.2%.
• Looking ahead, market activity is expected to pick up post-Chinese New Year holidays, though cautious sentiment may persist amid US tariff concerns and key US tech earnings releases, particularly on forward guidance and AI-related spending. Additionally, potential retaliatory measures from China and Mexico following Trump's tariff announcement could escalate trade tensions, affecting Treasury yields and global equity markets.
• Technically, the cross below the short-term (5-week) SMA against the medium-term (50-day) SMA signals continued near-to- medium-term weakness, with the index still trapped in a downward regression trend. Despite the weekly stochastic indicator nearing oversold levels, no clear reversal signals have emerged.
• In short, with rising concerns over Trump's tariffs and potential retaliatory measures from China, we expect escalated market volatility with a downward bias this week. Key support levels are at 1,545 and 1,521 (200-week SMA), while resistance levels are at 1,563 and 1,589.

Source: Kenanga Research - 3 Feb 2025