Correction Mode on Wider Mid-East Conflict

The local market fell into correction mode on Wednesday, as traders reduced market exposure after Iran retaliated with missiles against Israel for the incursion into Lebanon soil, increasing the risk for huge escalation of the war in the Middle East region. The FBM KLCI shed 17.08 points, or 1.03% to close at 1,639.31, off an early high of 1,647.30 and low of 1,633.08, as losers swarmed gainers 874 to 270 on higher turnover of 3.86bn shares worth RM2.72bn.

Key Supports at 1,633/1,620; Resistance at 1,660/1,675

Stocks should extend correction mode in the immediate term, as escalating geopolitical tensions play out and widen the conflict in the Middle East region, which will overshadow recent optimism over the strong ringgit and foreign fund inflows. Immediate index support remains at the recent correction low of 1,633, with 1,620 and then 1,600 acting as stronger supports. Immediate resistance is revised lower to 1,660, followed by the recent highs of 1,675 and 1,684, and then 1,695, the Dec 2020 high, as tougher resistance levels.

Bargain Supermax & Top Glove

Supermax need breakout confirmation above the 200-day ma (88sen) to boost upside momentum towards RM1.00 and RM1.10, while downside risk is restricted by the lower Bollinger band (75sen). Meantime, Top Glove will need to sustain above RM1.10 to improve recovery upside towards the recent peaks of RM1.21 and RM1.31 ahead, with the 200-day moving average (96sen) and lower Bollinger band (86sen) acting as important chart supports.

Middle East Tensions Weigh on Asian Markets

Stocks in Asia fell on Wednesday, as traders shied away from riskier assets after tensions in the Middle East flared up with Iran firing a barrage of missiles at Israel. Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah ally in Lebanon. The United States condemned Iran's move and said it was consulting with Israel on a response after U.S. military forces helped Israel defeat the attack. However, Chinese shares listed in Hong Kong advanced Wednesday, extending a stimulus-induced rally as traders returned from a public holiday. The extended rally signals continued optimism about China’s economy and risk assets after the authorities last week unveiled a range of stimulus measures that included interest-rate cuts, freeing-up of cash for banks, and liquidity support for stocks.

Traders in Asia were also assessing data on consumer inflation out of South Korea. The country’s consumer price index rose 1.6% in September from a year earlier, cooler than expected by economists polled by Reuters who expected a rate of 1.9%. Australia’s S&P/ASX 200 fell 0.13% to 8,198.2. South Korea’s Kospi fell 1.22% to end at 2,561.69, while the smallcap Kosdaq slipped 0.23% to 762.13. Japan’s Nikkei 225 fell 2.18% to end at 37,808.76, while the Topix dropped 1.44% to 2,651.96. Hong Kong’s Hang Seng index jumped 6.2% to 22,443.73, while mainland China will be closed for the rest of the week due to the Golden Week holiday.

Wall Street Subdued as Middle East Tensions Linger

Wall Street’s main indexes ended little changed overnight, as traders weighed the prospects of renewed inflation stemming from the Middle East conflict. The Dow Jones Industrial Average rose 0.09% to finish at 42,196.52. The S&P 500 added 0.01% to 5,709.54, while the Nasdaq Composite rose 0.08% to 17,925.12. Stocks came under pressure to kick off October as geopolitical concerns grip the market, dispelling the upbeat mood around hopes for US interest rate cuts. Traders are readying for more uncertainty as Israel begins a ground operation into Lebanon and tensions escalated with Iran-backed militant group Hezbollah.

On economic front, data overnight showed U.S. private payrolls increased more than expected in September, further evidence that the labor market is not deteriorating. Traders remained focused on September non-farm payrolls data due on Friday, while U.S. jobless claims data is due late Thursday. Nike slid 6.8% after the sneaker giant pulled full-year guidance ahead of its CEO change. Tesla dropped 3.5% after the company reported delivery numbers, though the technology sector was buoyed by a 1.6% rise in Nvidia.

Source: TA Research - 3 Oct 2024