Consolidation After US Fed’s Cautious Outlook

The local blue-chip benchmark recovered from early weakness to end flat on Thursday, amid declines among regional markets with sentiment dented by waning market momentum after the US Federal Reserve signaled a slower pace for rate cuts next year. The FBM KLCI closed flat at 1,600.09 (+0.51), after rising from early low of 1,590.83, as losers beat gainers 693 to 369 on higher turnover of 3.21bn shares worth RM3.03bn.

Support at 1,588/1,565; Resistance at 1,628/1,648

Stocks should extend profit-taking consolidation ahead of the weekend, with the broader market tone remaining cautious as ongoing inflation risks in the US have led to expectations of interest rates being higher for longer. Immediate index support stays at 1,588, the 38.2%FR of the 1,529 low (6 Aug) to 1,684 high (29 Aug) rally, with stronger key supports at 1,565, the 23.6%FR level, and then 1,550. Immediate resistance remains at 1,628, next 1,648, followed by the September peak of 1,675.

Bargain Maybank & RHB Bank

Maybank is attractive to bargain at current levels for rebound upside towards the 123.6%FP (RM10.38), with confirmed breakout to challenge the 138.2%FP (RM10.62) and 150%FP (RM10.82) going forward, and crucial chart supports coming from the 76.4%FR (RM9.60) followed by the 61.8%FR (RM9.35). Any further dips in RHB Bank shares to the 100-day ma (RM6.20) should attract bargain hunters looking for rebound upside to the 123.6%FP (RM6.66), with the next major resistance coming from the 138.2%FP (RM6.85) and 150%FP (RM7.01). Stronger support limiting downside is capped at the 76.4%FR (RM6.03).

Asian Markets Fall After US Fed Project Fewer Rate Cuts

Asian markets slid on Thursday after the U.S. Federal Reserve reduced the number of projected rate cuts in the coming year. The Fed cut rates 25 basis points on Wednesday as expected, but issued quarterly forecasts showing several officials expect fewer rate cuts in 2025 than previously estimated. The median estimate shows the benchmark rate falling to 3.75% to 4% by the end of next year, the equivalent of two quarter-point reductions. Fed Chair Jerome Powell said the central bank would be more cautious as it considers further adjustments to the policy rate, noting the Fed is committed to reaching its 2% inflation target.

In the region, the Bank of Japan kept interest rates steady on Thursday, as policymakers preferred to tread cautiously in pushing up borrowing costs amid uncertainty over U.S. president-elect Donald Trump's economic plans. Australia’s S&P/ASX 200 dropped 1.70% to close at 8,168.20, while South Korea’s Kospi fell 1.82% to 2,439.17. Japan Nikkei 225 also lost 0.69% to 38,813.58 and the broad-based Topix slipped 0.30% to 2,711.64. In mainland, the Shanghai Composite fell 0.36% to 3,370.03, while Hong Kong’s Hang Seng slipped 0.56% to 19,752.51.

Wall Street Subdued on Hawkish Fed Tone

Wall Street’s main indexes closed little changed overnight, with a hawkish outlook from the Federal Reserve on its path for interest rates looming over markets. The Dow Jones Industrial Average inched up by 0.04% to 42,342.24. The S&P 500 slid 0.09% to 5,867.08, while the Nasdaq Composite fell 0.10% to 19,372.27. Markets were jolted after the Fed penciled in just two rate cuts for 2025 at its December policy meeting, pouring cold water on traders’ expectations for markedly lower rates next year. Officials also said they expect inflation to be stickier than they previously expected, further fueling concerns about how many rate cuts are on the table.

Markets are also grappling with the possibility of a government shutdown this weekend after President-elect Donald Trump torpedoed a bipartisan deal, insisting Republican lawmakers pass a narrower bill that meets his demands. On the economic front, the third estimate for the third quarter US GDP showed the economy grew at an annualized rate of 3.1%, above the previous reading of 2.8%. Separately, data showed 220,000 weekly unemployment claims were filed in the week ending Dec. 14, a decrease from the 242,000 seen the week prior.

Source: TA Research - 20 Dec 2024