Ongoing Rebound May be Capped Near 1,600-1,613 Levels Amid Upcoming Results Season

Technical Pick: WASCO 

KLCI: 1585.17 (10.7)
DOW: 44747.63 (-125.7)
MSCI Asia: 185.25 (1)
FCPO (RM): 4411 (8)
BRENT (USD): 74.29 (-0.32)
USDMYR: 4.4353 (0.012)
SGDMYR: 3.2764 (0)
EURMYR: 4.5947 (-0.007)
AUDMYR: 2.7773 (0)
GBPMYR: 5.5114 (-0.025)
US: 10-yr yield (%) 4.4342 (0.016)
BNM:10-yr yield (%) 3.778 (-0.003)

Asia/US. Tracking a strong overnight performance on Wall St, Asian markets mostly traded higher, fuelled by optimism that the US and its counterparts have adopted a more measured and agile approach to tariffs, in contrast to the aggressive stance during Trump 1.0. Sentiment was further bolstered by robust gains in AI and technology-related stocks, following DeepSeek's breakthrough. In the run-up to the NF payrolls report tonight, the Dow slipped 126 pts to 44,747 as investors parsed a string of underwhelming results by QCOM, F, ARM, SWKS and HON. On results front, AMZN dived 5% after hours on gloomy outlook despite topping earnings forecast. 

Malaysia. Driven by higher Wall St and regional markets coupled with easing foreign net outflows, KLCI jumped 10.7 pts to 1,585.2, marking its 4th gain in five session. Market breadth slowed to 1.26 vs 1.80 previously while trading volume inched up 2.4% to 2.93bn shares valued at RM2.11bn (-9% DoD) as profit taking kicked in. Foreign net outflows moderated but continued for the 24th day (-RM26m, Feb: -RM261m, YTD: -RM3.40bn) alongside local retailers (-RM9m, Feb: +RM19m, YTD: +RM1.23bn) while local institutions (+RM35m, Feb: +RM242m, YTD: +RM2.16bn) emerged as major net buyers.

Technical view We reiterated KLCI’s ongoing oversold rebound may continue after hitting the downtrend line near 1,545, supported by the bottoming up technical readings and resumed buying interest after the CNY holidays. A confirmed breakout above 1,589 (61.8% FR) could propel KLCI towards the 1,600, 1,613 (200D MA) and 1,625 (38.2% FR) zones. On the contrary, a breakdown below 1,566 (76.4% FR) and 1,545 support levels may drag the index near 1,529 (Aug 6 low).

Outlook In the wake of moderating foreign net outflows and a fresh low in foreign shareholding at 19.4% in Jan 25, the oversold rebound could continue, aided by easing concerns over a full-blown US-China trade war (with the 10% tariff is far less from Trump’s 60% levy promised in his election campaign) and optimism that the US and its counterparts have adopted a more cautious approach to tariffs. Nevertheless, KLCI may face stiff hurdles near 1,600-1,613-1,625 zones as we approach the upcoming Feb results season. 

Technically, WASCO (BUY, TP: RM2.41) is poised for an oversold rebound after sliding from RM1.28 (Jan 9) to a low of RM0.98 (Feb 6) before closing at RM1.01. Following the Hammer-liked candlestick pattern and grossly oversold positions, WASCO is ripe for bargain hunting for potential rebound towards RM1.10 (50D MA) levels. A confirmed breakout could propel the stock towards RM1.15 (20D MA0 and RM1.21 (200D MA) while major support levels are situated near RM0.96-0.98 territory.

Source: Hong Leong Investment Bank Research - 7 Feb 2025