Led by rebounds in the Nikkei 225 (+0.69%), TWSE (+0.50%) and KOSPI (+1.37%), Asian markets gained as investors awaited the FOMC (16 Sep) and BOJ (18 Sep) decisions. Easing oil prices, after the US said the damaged Saudi pipeline would resume operations within days, alongside a broadly flattish US10Y yield, supported risk appetite. Meanwhile, SHCOMP rose 0.79% amid signs of progress in US-China trade talks. Prospects for an extension of the trade truce are firming as both sides discuss targeted tariff cuts on US energy and agricultural products, ahead of Bessent’s meeting with He Lifeng this weekend and the Trump-Xi summit in Washington on 24 Sep.
Wall Street (Dow -1.21%, S&P 500 -0.44%, Nasdaq -0.01%) fell after the Fed raised rates by 25bps, as expected, to 3.75-4.00%, its first hike since Jul 23. The unanimous decision and latest dot plot signalled at least one more hike in 4Q26, while upward revisions to inflation and GDP growth projections reinforced the Fed’s hawkish stance. Warsh reiterated that inflation remains elevated and stressed the need to restore price stability, tempering hopes of a limited tightening cycle. Credit-sensitive banks led losses, with Bank of America (-2.7%), Wells Fargo (-3.0%) and Citi (-2.4%), while Microsoft (-1.4%) and Alphabet (-0.6%) also weakened.
Mirroring weak Wall Street and regional markets on 15 Sep, the KLCI tumbled 18.8 pts to 1,679.2 ahead of the Malaysia Day holiday (16 Sep) and pivotal FOMC decision, led by PMETAL, TENAGA, YTLPOWR, PBBANK, YTL, 99SMART and PCHEM. Market breadth deteriorated to 0.46 from 0.55 as investors grappled with surging oil prices and bond yields, alongside a broader reassessment of the investment cycle, particularly across chips, data centres and infrastructure. For the 3rd straight session, local retailers remained the key net buyers (+RM74m; 5D: +RM352m; MTD: +RM932m; YTD: +RM0.49bn), while foreign institutions (-RM17m; 5D: – RM275m; MTD: -RM766m; YTD: -RM5.22bn) and local institutions (-RM57m; 5D: – RM77m; MTD: -RM166m; YTD: +RM4.73bn) remained net sellers.
After rallying 95 pts from its YTD low of 1,655 on 29 Jun to an intraday high of 1,753 on 26 Aug, the KLCI has extended its downtrend to 1,679.2, slipping below key MAs and firmly back within the descending channel, keeping the bearish bias intact. The break below 1,685 (50% FR) has heightened downside risk toward 1,655 (YTD low) and 1,639 (23.6% FR). On the upside, reclaiming 1,685–1,700 would be key to a rebound toward 1,717 (MA50) and 1,731 (76.4% FR), while a decisive breakout above
these hurdles would negate the bearish setup and open the way toward 1,753, followed by 1,771 (YTD high).
Following Wall Street’s overnight slide amid a hawkish Fed narrative, elevated oil prices and bond yields, alongside concerns over the technology sector’s spending boom, the KLCI is likely to entrench in extended consolidation. This challenging external backdrop could be compounded by domestic headwinds, including potential 2H earnings disappointments amid a higher-for-longer cost environment, the overhang from the KLCI’s expansion to 50 constituents and emerging GE16 political jitters, further tempering on sentiment.
