Bursa Malaysia has moved lower in two straight sessions, slipping nearly 10 points or 0.7 percent along the way.
The Kuala Lumpur Composite Index now sits just above the 1,490-point plateau and it may extend its losses again on Thursday.
At 9.18am, the FBMKLCI dipped -2.24 points to open at 1,488.49.
RHB Retail Research in a note today (Jan 18) said the FKLI extended its sideways movement below the 1,500-pt level yesterday. It began
trading at 1,496 pts and oscillated between 1,497 pts and 1,487 pts before closing at 1,490.50 pts.
The latest price action confirmed that the 1,500-pt level is acting as a strong resistance. This, coupled with the RSI rounding
downwards, show that momentum is slowing down.
The index is expected to consolidate sideways in the coming sessions, as it attempts to set up a consolidation phase. We observed that the index is trading above the 50-day and 200-day SMA lines, and hence, the bullish setup remains intact.
During this consolidation phase, we retain the bullish bias. Traders should maintain the long positions initiated at 1,455 pts (the close of 3 Nov 2023).
To manage downside risks, the stop-loss is set at 1,450 pts. The first support is located at 1,470 pts, followed by 1,450 pts. The nearest resistance is pegged at 1,500 pts, followed by 1,530 pts.
Malacca Securities (MSSB) said the FBMKLCI (-0.18%) closed lower in line with the negative performance of the regional markets, dragged by Industrial Product and Transportation heavyweights.
On the broader market, the Utilities sector (+1.03%) gained thanks to the YTL counters, while the Industrial Products & Services sector (-1.59%) fell.
The Day Ahead
The FBMKLCI traded lower for the second session as the market sentiment remains negative as we believe margin calls were activated in most of the counters after several companies hitting limit-down conditions.
For the upcoming session, we believe the negative sentiment could persist on the fundamentally weak companies, but bargain hunting activities will be seen in solid companies.
Meanwhile, on Wall Street, the 3 major indexes ended lower following a spike in US Treasury yield after a stronger-than-expected retail sale report. This has contributed to lower probability of the Fed cutting its key policy rate in March, down from 66% to 56% based on Bloomberg.
On the commodity markets, the Brent oil price traded marginally higher around uSD78, despite weak China data.
Sectors focus: With several companies hitting limit-down, we opine that traders will be focusing on fundamentally solid companies going forward. We expect the ongoing theme on the KL-SG HSR, coupled with the Johor-region catalysts may be the winners for 2024, thus trading activities could focus on the Construction, Property, Building Material as well as the Utilities companies at least for the near term. Meanwhile, we like the defensive Consumer sector as we think the overall consumption is stable and growing at this juncture.
Bloomberg FBMKLCI Technical Outlook
The FBMKLCI ended lower for the second consecutive days. The technical readings on the key index were however mixed, with the MACD Histogram extending another negative bar, while the RSI maintains above the 50 level.
The resistance is envisaged around 1,510-1,520 and the support is set at 1,470-1,480.\
CGSCIMB said most Asian stock markets saw continued weakness on Wednesday on the back of a potential patchy recovery in China following the release of the country’s latest economic data.
The local benchmark FBMKLCI (KLCI) closed 2.66pts or 0.18% lower to end the day at 1,491.21. Most sectors stayed in the red with industrial products (-1.78%), energy (-1.03%) and technology (-0.93%) being the main laggards.
The defensive sectors like utilities (+1.03%) bucked the trend together with telecommunications (+0.55%) and plantation (+0.12%).
Trading volume eased to 5.23bn (down from 5.84bn on Tuesday) while trading value fell to RM3.17bn (down from RM3.59bn previously).
Market breadth stayed firmly negative as 832 decliners outweigh 265 gainers. The benchmark formed a spinning top yesterday, which is a neutral pattern pared.
We expect the index to continue extend its current pause after pulling back from the 13-month high. The sideways chop (with a slight negative bias) is likely to be temporary before further upside takes place next.
The 1,500-1,510 band acts as the immediate resistance for now. A breakout and a close above this band may take prices up towards the 1,521-1,527 levels next.
We do not foresee a move below the 1,477 or 1,470 level. IF the KLCI tumbles below 1,470, the immediate term outlook would turn negative in the near-term. Our portfolio stays in risk-on mode this week.
