The FBM KLCI (-0.36%) closed lower, pressured by selling in Banking and Utilities heavyweights, particularly PBBANK (-6.0 sen) and PCHEM (-14.0 sen), as investors traded cautiously following the selloff on Wall Street.
At 9.15am, the FBMKLCI rose +4.08 points to open at 1,639.82.
According to Malacca Securities (MSSB) in a note today (Aug 26), the Energy sector (+0.10%) was the best performer.
The FKLI reverted back to a consolidation last Friday, ceding 3 pts to close at 1,641.50 pts.
RHB Retail Research (RHB) said the index opened at 1,645 pts.
After oscillating between 1,647 pts and 1,636.50 pts, it settled at 1,641.50pts – thereby printing a bearish candlestick.
The narrow body of the candlestick shows that market sentiment remains neutral.
Despite selling pressure, the index is still trading above the 50-day SMA line.
The bulls still have the technical advantage, as the index is staying above the medium-term moving average line.
Both 50- and 200-day SMA lines are still trending upwards, solidifying the bullish technical setup.
They expected the FKLI to resume its upside movement after the consolidation phase.
For now, they will stick to a positive trading bias.
Traders should stay in the long positions initiated at 1,565.50 pts, ie the close of 6 Aug.
To mitigate the trading risks, the stop-loss is fixed at 1,600 pts.
The first support is marked at 1,620 pts, followed by the 1,600-pt level.
Meanwhile, the immediate resistance is pegged at 1,670 pts, followed by 1,700 pts.
The Day Ahead
The local exchange ended on a negative note prior to the Jackson Hole Symposium, in line with weak regional performances as profit-taking activities emerged, MSSB said.
However, positive sentiment was observed on Wall Street following Jerome Powell’s speech, which suggested that the Fed might adopt a dovish stance in the upcoming FOMC meeting, with a possible 25 basis point interest rate reduction.
Looking ahead, traders will be closely monitoring key economic data, including (i) consumer confidence (Tue), (ii) preliminary GDP (Thu) and (iii) unemployment claims (Thu), and (iv) core PCE data (Fri).
In the commodity market, Brent oil surged above USD79, while gold prices held steady above USD2,500.
CPO prices rebounded significantly, surpassing RM3,800, as sentiment pointing towards positive demand from India ahead of the festive season (September-November).
Sector Focus: With the positive close on Wall Street last Friday, they anticipated buying support to emerge in the local market.
While the weaker ringgit may dampen sentiment, the downside could be limited as bargain-hunting activities pick up in line with the US stock markets.
Meanwhile, MSSB said they favour the O&G sector, given the rebound in crude oil prices.
Also, the Consumer, Aviation, Construction, Building Materials, and Automotive sectors could benefit in a stronger ringgit environment.
Bloomberg FBMKLCI Technical Outlook
The FBM KLCI index ended lower towards the 1,635 level.
However, the technical readings on the key index were positive with the MACD histogram forming another positive bar and the RSI trended above 50.
The resistance is envisaged around 1,650-1,655 and the support is set at 1,615-1,620.
CGS International (CGS) said that Asian stock markets finished the week on a mixed note ahead of Fed Chair Jerome Powell’s Friday speech.
The local benchmark FBMKLCI (KLCI) lost 5.92pts or 0.36% to end the day at 1,635.74.
However, the index still gained 11.84pts or 0.73% week-on-week.
Selling pressure weighed across the board last Friday with technology (-3.19%), property (-1.68%) and healthcare (-1.30%) being the top laggards.
The only gainers were energy (+0.10%) and plantation (+0.01%).
Trading volume decreased to 3.53bn (down from 3.73bn previously) while trading value dropped to RM2.80bn (down from RM3.08bn previously).
Market breadth stayed negative as 255 gainers thumped by 888 decliners.
The benchmark appears to be still in the process of finding its base.
For now, they maintain their view that the current weakness is just a pullback in the larger trend.
However, falling back and closing below 1,632-1,638 (May-July highs) likely warns that the recent pop-up to 1,660 may turn out to be just a fake-out.
Coupled with the triple bearish divergence (not shown here), there is a need to be cautious.
CGS said they will turn short-term bearish if the KLCI closed below the 1,614-1,624 support.
The following support is at 1,593-1,598. On the upside, resistance is seen at 1,660 and 1,680.
Their portfolio stays in risk-on mode this week.
