Cautious as Investors Assess New U.S. Tariffs

The local blue-chip benchmark slipped on Monday in-line with regional markets after President Donald Trump imposed tariffs on Canada, Mexico and China over the weekend, sparking concerns about higher inflation and fewer rate cuts in the U.S. The FBM KLCI lost 3.29 points to close at 1,553.63, off an opening low of 1,546.68 and high of 1,556.74, as losers edged gainers 589 to 383 on total turnover of 2.08bn shares worth RM1.75bn.

Support at 1,550/1,529; Resistance at 1,605/1,630

Trade will likely remain cautious with a downward bias as investors await the release of key employment data from the U.S. later this week for further cues on the Federal Reserve’s interest rate direction following President Trump’s new tariffs. Immediate index support remains at 1,550, with stronger supports at the 6/8/24 low of 1,529 and 1,500 psychological level. Immediate resistance is maintained at 1,605, with next upside hurdles at 1,630, followed by 1648.

Bargain Hartalega & Kossan

A confirmed breakout on Hartalega shares above the 100%FP (RM3.72), would enhance upside momentum for share price to target the 19/12/24 peak (RM4.00) and the 123.6%FP (RM4.27) ahead, while downside risk is cushioned by the 76.4%FR (RM3.16) and 61.8%FR (RM2.81). Similarly, Kossan shares will need convincing breakout above RM2.55, to challenge the 100%FP (RM2.71), with tougher resistance coming from the 06/01/25 peak (RM2.87), while key chart supports at the 61.8%FR (RM2.10) and 50%FR (RM1.91) limit downside.

Trump’s Tariffs Hit Asian Markets

Asian markets slumped on Monday after U.S. President Donald Trump imposed trade tariffs on several countries and threatened to do the same with the European Union and U.K. Trump slapped Canada and Mexico with duties of 25% and China with a 10% levy at the weekend, as he had threatened last month, calling the measures necessary to combat illegal immigration and the drug trade. In response to the US announcement, Canadian Prime Minister Justin Trudeau unveiled a 25% counter-tariff, while Mexican leader Claudia Sheinbaum pledged retaliatory levies. The rapid escalation in tensions is fueling a flight to safe-haven assets as traders brace for the knock-on effects of Trump’s move on everything from inflation to geopolitics and economic growth.

On economic news, China’s factory activity slowed in January as the country gears up for fresh U.S. tariffs this month, a private-sector survey showed Monday. The Caixin/S&P Global manufacturing purchasing manager’s index came in at 50.1 in January, missing the Reuters poll forecast of 50.5. Japan’s Nikkei 225 dropped 2.66% to 38,520.09, while the Topix lost 2.45% to 2,720.39. Australia’s S&P/ASX 200 dropped 1.79% to 8,379.40 and South Korea’s Kospi fell 2.52% to 2,453.95. Hong Kong’s Hang Seng Index also lost 0.04% to 20,217.26, while Chinese markets remain closed for the Lunar New Year holiday.

Wall Street Pares Losses on Mexico Tariff Delay

Wall Street’s main indexes closed off the lows of the session overnight after U.S. and Mexico struck a last-minute deal to delay new tariffs. The Dow Jones Industrial Average fell 0.28%, to close at 44,421.91. The S&P 500 slipped 0.76% to 5,994.57, and the Nasdaq Composite dropped 1.20% to 19,391.96. While all three major U.S. stock indexes veered sharply lower after the opening bell, they partially recovered after it was announced that tariffs on Mexican imports would be paused for a month as Mexican President Claudia Sheinbaum agreed to reinforce its northern border with the United States.

Traders were also on the edge of their seats as President Trump and Canadian Prime Minister Justin Trudeau held a phone call on Monday afternoon as 25% tariffs on imports from Canada were scheduled to begin on late Tuesday. On the economic front, factory data showed U.S. manufacturing activity expanded for the first time since October 2022, and spending on residential construction projects rebounded. Defensive stocks outperformed while tech and Consumer Discretionary fell.

Source: TA Research - 4 Feb 2025